In the global knowledge based economy enterprises increasingly face the challenge of collaborative knowledge production in a networked context. Although the importance of the participation in such knowledge-networks is widely recognised, the capabilities for a successful participation have, so far, not been elaborated. Based on the dynamic capabilities view this paper proposes a holistic and practical concept of knowledge-networking capability (KNC). For this purpose knowledge-orientated and interaction-orientated capabilities elaborated in the literature are combined. Extracting the relevant strengths and weaknesses of German small and medium sized enterprises allows for identifying strategic starting points for a systematic development of KNC.