Abstract: Abstract: R&D and knowledge absorption, which are the majority sources for firms’ innovation, have a different effect on innovation performance. The efficiency of firms’ innovation is measured based on survey data using Data Envelopment Analysis (DEA). The results show that only 4604% of samples lie on the efficiency frontier and the return of scale are decreasing. Lots of inputs have been wasted, especially the knowledge obtained from the cluster and university; and more than half of knowledge has not been fully utilized because of poor internal communication; furthermore, the patent output is shortage. It is also found that expect industry types, all the factors including scale of firms, property right, target markets, as well as whether or not has a own brand, have insignificant effects on the efficiency.

Key words: knowledge production, innovation, knowledge sources, DEA, R&D