A capabilities perspective of farm level innovation in the beef cattle industry is presented using information economics. The knowledge capabilities of non-corporate beef cattle enterprises have two interrelated components: the knowledge generated from the activities that takes place during production; and the information channels that producers possess to source external information. Although both are important for analysing innovation, the external information sources relating to producers’ knowledge are emphasised here. Emphasis on the path-dependent nature of knowledge focuses the discussion of innovation on the communication of information and how this affects the organisation of knowledge. The effects of differing knowledge capabilities are central to understanding the variation in innovative processes. Preliminary results from focus groups and in-depth interviews of both producers and their nominated information sources in the New England area of New South Wales in mid-2009 provide evidence for the efficacy of information channels. Case studies of innovations exemplify how differing attributes of innovations combine with network structures and institutional factors to influence the processes of communication between producers and their information sources. Communication of high quality information is shown to be more involved than simple exposure and must be considered from the point of view of the user, allowing it to be reconciled with existing knowledge of the producer. Of importance to producers is the source, delivery and history of the information and these are reflected in the approach taken in this research. The outcomes suggest that producers should be making decisions on the basis of their self organised knowledge capital rather than following innovations fashionable in the industry at large. The role of policy makers is to complement this by providing favourable conditions for knowledge capital formation where high quality information flows are likely outcomes. Policy makers could look at improving the ability of producers to integrate new technologies and practices into their production indirectly rather than looking to directly persuade them to adopt individual innovations.