This paper provides empirical evidence on the effect of the external knowledge sourcing strategies adopted by firms, on the development of both product and process innovation, and assesses to what extent this effect is influenced by the firm's internal technological capabilities. Our empirical investigation is based on a sample of more than 600 science-based firms active in innovation activities taken from the Spanish Innovation Survey 2004. We find that the effects of the knowledge sourcing strategies differ significantly across innovation types (product or process innovation). In addition, our results suggest that there are possible substitution effects between external sourcing strategies and internal R&D. Thus, the greater the firm?s internal technological capability, the less important is the cooperation with scientific agents in determining product innovation.