We evaluate the impact of public grants on the technological output of Spanish manufacturing companies using the utility models as a measure and compare them with patents. We postulate that capabilities of the firm play a decisive moderating role in the relationship between grants and utility models. Results suggest that a firm's capability to constantly maintain an updated knowledge base has a positive influence on the abovementioned relationship. Also, firm's capabilities of planning innovation, and cooperating with partners, and its absorptive capacity are crucial in the creation of both utility models and patents.