Our research examines how open innovation can contribute to the firm’s dynamic capabilities, by helping to restore a focal firm's capability proximity with it's environment. Through the application of an in-depth multiple case approach examining the NPD process in a UK manufacturing SME, we were able to establish the relationship between OI and the firm's dynamic capabilities. We contribute to existing literature on open innovation and dynamic capabilities by revealing some of the underlying mechanisms that affect knowledge transfer when engaging in open innovation. This includes factors such as resource expenditure, risk and reward. Furthermore, we found externally accessed tacit knowledge provided a more significant contribution to a radical NPD project, and combining tacit knowledge from multiple sources can be used to overcome more complex issues during the process of development.