Small and medium batik sector are significantly contribution to economic
development and the cultural  heritage,  but development are still many problems,
especially  the  empowerment  of  internal   assets  so  it  has  an  impact  on  the
development of innovation capability ann competitive advantage.  This study aims
to examine the effect of knowledge sharing  process   to innovation capability and
competitive  advantage   at    small  and  medium  batik  sector  in  Central   Java.
Sampling methods using purposive sampling and data  analysis using the Partial
Least  Square  (PLS).  The  research   results       that    knowledge  donataing   and
knowledge collecting are significantly effect on innovation capability. Knowledge
donating, knowledge collecting and innovation capability  are  significantly effect
on the  competitive advantage.

Keywords: Knowledge collecting , Knowledge donating, Innovation capability