What operational factors can explain the performance differences between manufacturing firms? Scholars have produced a significant volume of research that examines the linkages between operational factors (resources and practices) and firm performance. There is agreement that organizational capabilities mediate the relationship between operational factors and firm performance. However, due to the numerous and sometimes contradictory definitions of organizational capabilities in the literature and because organizational capabilities includes non-operational factors, it has been suggested that operational capabilities, as a sub construct of organizational capabilities, is more appropriate for establishing an empirical relationship between operational factors and firm performance. Scholars have argued that process improvement practices facilitate the development of operational capabilities, which can consequently lead to improved firm performance. Other scholars have argued that process improvement practices facilitate organizational knowledge creation, which can also influence firm performance. We integrate these two theoretical perspectives into a single conceptual model that better explains the relationship between knowledge-creating practices and firm operational performance. Specifically, we argue that knowledge-creating practices play a significant role in developing a firm’s operational capabilities, which in turn, influence firm operational performance. This research investigates the existence of a relationship between organizational knowledge creation and firm operational performance that is mediated by operational capabilities.