Creative social enterprises have several distinct characteristics that support the United Nations' sustainable development goals. In doing so, creative social enterprises embed innovation capability in their businesses, and it happens to be a dynamic force for their economic sustainability while also promoting cultural sustainability. The research studies how the innovation capability of creative social enterprises developed in collaboration with the community of artisans. The study elaborates how creative social enterprise revives the century old handicraft tradition through innovation capability (IC) theoretical lens. Innovation capability has generated extensive interest both academically and practically. However previous works have mostly been performed at conventional organizations with few discussed at creative social enterprise and community level, especially in artisans’ community who are struggling to preserve their handicraft traditions. The research focusing on a unique case, creative social enterprise who works with 14 villages in east Nusa Tenggara Timur, Indonesia. The research used qualitative exploratory study design with single case study. In-depth interviews, a literature review, and documentation were used to collect data for the study. The study result is framework innovation capability in which co-creation as the main engine of IC development of CSE and community of artisans. CSE develops their innovation capability by nurturing multidiscipline team development, listen to market demand, constantly do research and development. Community of artisan’s innovation capability can be developed by considering factors like local culture, local material, local champion, village governance and artisans’ willingness to learn. This research contributes in two ways: first, it provides a comprehensive understanding of how to collaboratively develop innovation capability; and second, it successfully identifies the determinants of innovation capability in both creative social enterprise and artisan communities.