The purpose of this research is to see the effect of functional conflict, knowledge sharing on innovation capability and the influence of the quality of the relationship between channel members as a moderator variable on the relationship of knowledge sharing and innovation capability. The sample in this study were members of the bottled drinking water marketing channel, namely producers or companies, distributors and retailers. The sampling technique used purposive sampling method and data collection techniques used a questionnaire then processed with data analysis techniques structural equation modeling using SmartPLS 3.0 software. The results in this study indicate a positive influence on functional conflict on knowledge sharing, the positive influence of knowledge sharing on innovation capabilities, but the quality of relationships between members in the marketing channel does not have a significant effect on the relationship between knowledge sharing and innovation capability.