Abstract
This study explains the importance of building human resource capabilities through increased competency. The competency is built consciously by individuals, groups and organizations through knowledge management by strategic Human Resource Management (HRM). Creating a knowledge management based-competitive advantagewill affect the culture pattern, especially the innovation culture (Naranjo-Valencia, 2011). This advantage focuses on continuous learning and team performance in order to create organizational competency or build new capabilities (Amabile, TM 2000). The relationship between strategic HR practices, organizational learning, knowledge management and capability has long been studied, among which are, by Jaw and Liu (2003), Gomez (2004), as summarized by Theriou and Chatzoglou D. (2008). This study will strengthen the knowledge management dimension in creating capability. The knowledge management superioritybehavior will create organizational capabilities.Meanwhile, competency is derived from organizational capabilities that can be described as individual, group and organizational capabilities.Co-creative predictive competencywhich is built on the concept of Resource-Based View produces strategic HR investmentwhich has a competitive advantage. This advantage will then create innovation and creativity in order to improve performance. This is necessarily required to especially face upcoming competition. Not every innovation succeeds in improving performance (Volberda, 2012), that’s why an integrated innovation management model is needed. It consists of antecedents and consequences. The co-creative predictive competency model is proposed to be a novelty of this study, because the variable emphasis is initiative strategic HRs. The initiatives in among other things are addressed to conform knowledge initiatives to some field practices, such as accelerated management activities on change anticipation (Martin 2006, Zangiski, M. A, 2013), product innovation initiatives, innovation processes and programs, both sequential and radical. Marno (2015) explained the failure of quality management to create innovation and imitating competency because the understanding of competency theory on qualities did not fit the practice of the organization. This study was conducted in SMEs in Central Java covering sectors of trade, industry, services and other sectors of creative economy. It is expected to generate empirical models that can be used to enrich science varieties and can also be applied as a basis for policy making.

Keywords: Strategic Human Resource Management, Co-Creative Predictive Competency, Innovation and Imitating Creativity, Integrated Innovation Management, Organizational Performance.