Abstract In the context of today's Chinese market, the pressures from the decreasing economy compel firms to select proper innovation strategy based on their inherent traits to sustain profits and growth. However, the ongoing institutional transition may not adequately underpin the marketbased exchange of innovation resource, market information and technological knowledge, which necessitate business ties as the effective conduits for firms' resource renewing. Unfortunately, previous research rarely explores the subdimension of managerial business ties, and thus their potential nonlinear functions upon the outcome variables, and their diversified effects on different types of innovation. In this consideration, based on the survey data from 274 China firms, this research formulates a conceptual model of horizontal ties, vertical ties, exploratory innovation and exploitative innovation. Our empirical results indicate that: vertical ties have a Ushaped effect on exploitative innovation, but an inverted Ushaped effect on exploratory innovation. In contrast ,horizontal ties have an inverted Ushaped effect on exploitative innovation, but a Ushaped effect on exploratory innovation.