Building on the resource-based view of the firm and the theory of dynamic capabilities, coupled with investigations of 112 Chinese firms and studies on leading foreign corporations, a theoretical framework of the dynamic capabilities-based strategy innovation (SI) is put forward and analyzed empirically. This paper complements previous publications on the theories of strategy and innovation. The dynamic capabilities-based SI is the key to wealth creation; it helps to build and sustain competitive advantage through developing and leveraging assets and competencies and to delight customers through enhancing customer satisfaction and loyalty. It is concluded that SI is the only path for firm's growth, especially Chinese enterprise in intensified competition in the knowledge economy. Some theoretical and policy implications are addressed. Further studies are to answer two crucial questions such as: what preconditions encourage effective new strategies to emerge in one firm and not in another?; and what is the mechanism of the dynamic capabilities-based SI?.
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