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This paper explores the relationships between internal R&D and external knowledge acquisition as business innovation strategies. Drawing on absorptive capacity framework (Cohen and Levinthal, 1990), we distinguish and empirically evaluate two possible relationships: coexistence and complementarity. The analysis is based on a large sample of manufacturing firms taken from the Spanish Survey of Technological Innovation 2004. Our results show coexistence between internal R&D and external knowledge acquisition but they do not provide evidence that these activities are complementary with respect to influencing innovation performance. In other words, although our results suggest that internal R&D activities are associated with a greater use of external knowledge sourcing strategies, they do not seem to have synergistic effects to develop new products.