Despite the theoretical and managerial importance of the notion of organizational capabilities, it is still not entirely clear what capabilities are and how they are created. With this aim, building on the extant literature, we propose a conceptual framework that accounts for both the constituent elements and the creation of organizational capabilities. Constituent elements refer to the knowledge underlying the firm's capacity to act, and to human actors as the subjects of knowledge creation and application. Much like a weaving process, the creation of organizational capabilities entails the synthesis and integration of constituent elements within the realm of a behavioral "place" that represents a particular condensation of actors and knowledge flows within the broader organization. The capacity of the firm to build organizational capabilities, by itself a meta-capability, is affected by the institutional qualities of its socio-cultural environment. Within the context of this framework, the question of what constitutes a firm's unique competence, compared to its normal activities, equates with the question whether a particular group of organizational actors exist with the requisite resources (basically the knowledge and skills of its members) and socio-cultural configuration so as to perform value-adding activities that cannot be imitated by rivals.