In this paper I ask the basic question highlighted in the title, how does innovative potential and collaborative capacity contribute to a firm’s innovativeness? To address this central question I draw on innovative potential and collaborative capacity as a dynamic notion evaluates the data from India. This paper tries to create a framework creating a sustainable environment for ICT Innovation. To do that I argue that innovative potential and collaborative capacity provide a constellation of inputs to the firm to address both internal and external challenges. For instance while innovative potential works at a project or an individual level while collaborative capacity is seen to work at a firm or perhaps at the inter firm level. This does not mean IP acts only at the locus stated. I conjecture that IP/CC interact with each other at defferent levels, where each takes turn in driving the process of ICT Innovation.