Presently, the production capacity of many small and medium institution are untapped. This leads to the reduction of productivity and competitive power both at national and institutional level. Thus, the objective of this study was to codify a model to make use of these untapped capacities. To do so, the research method of grounded theory was used. To gather the data, the managers of the institutions and experts were interviewed. The related documentaries through the three phasic of coding i.e. open, axial and selective were analyzed. The result showed that both national and institutional level factors effected the untapped production capacity. Using untapped capacities requires the formation and development of trans-institutional networks, so as the possibility of transferring untapped capacities to other institutions be provided. Therefore, the national level strategies and support for trans-institution networks and the strategies of industry level should be simultaneously implemented. But the environmental factors such as law and order, economical, cultural, political factors affect the success of using untapped capacities. The outcomes of using untapped capacities would be obvious on both macro and micro level, such as creating jobs, avoiding unemployment, and increasing national productivity for macro and on micro-level, cost and benefit for employers and contractors could be mentioned.