The purpose of this research is to find out the effect of firm innovation activities on different firm’s performance measures. Additionally, this study explore the extent of innovation-performance relationship between SOEs and Non-SOEs firms. Innovation data is collected from the Chines Security and Market Research Database (CSMAR) for the period 2008 to 2016. OLS regression with year and industry fixed effects is applied to the data. The results showed that the innovation activities measured through Patents grants, innovation grant and industrial design grants have a positive and significant effect on firm performance. When the data is divided into state vs non-state firms, we find that the state owned firm’s innovative activities effect on firm is greater than the non-state firms. Our findings support the fact that innovation strategy is an important driver of firm performance and should be developed and executed as an integral part of the business strategy. Managers should recognize and manage the innovations in order to boost their operational performance. Having a clear understanding of the exact nature of innovations will help firms to prioritize their market, production and technology strategies, to be followed by appropriate subsequent action plan.
Keywords: Innovation; Firm Performance; State Owned vs Non-state owned; Emerging Market
