Abstract：The paper studied the effect of China s innovation policy on firm performance,using enterprises’ innovation capability as mediating variables.Based on survey data of enterprises in Zhejiang,the study found that:supply and environment instruments had positive effect on product and process innovation capability;demand instruments had no significant effect.Different innovation capability had different effect on firm performance.Product innovation capability had positive effect on financial and market performance.Process innovation capability had positive effect on financial performance.Innovation capability of firm had full mediating role between innovation policy and performance.Scale of firm had effect on innovation policy performance.The effect of product innovation capability on performance increased with scale.SMEs process innovation capability had significance effect on firm performance;large enterprises had no significant effect.
2013, 
