Also referred to as linguistic competence, it was brought into linguistics by Noam Chomsky to refer to an idealized mature speaker’s underlying knowledge of the grammatical rules of a natural language, in particular generative grammar and transformational grammar, something he contrasts with performance. Competence in this sense, according to Chomsky, who labeled it formal linguistics, can only be studied if natural languages are regarded as mental objects.
See Generative grammar approach, Linguistics, Performance (linguistics), Transformational grammar approach