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Abstract: Based on investigations of 112 Chinese firms and studies on foreign leading corporations, a theoretical framework of dynamic capabilities-based strategy innovation (SI) is put forward. Several large firms in China winning through SI were studied empirically. This paper complements previous publications on the theories of innovation and strategy. This work's findings will be useful for managers interested in our approach, which highlights the importance of SI and focuses on and points out the major pitfalls in the innovation processes. Implementing the dynamic capabilities-based strategy innovation can effectively cultivate and develop core competences of corporations. It is concluded that implementing SI is the only path for Chinese enterprise growth in the intensified competition in the knowledge economy.

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