Abstract: The importance of design innovation is well recognized. Product meaning innovation has not been well studied as core to design innovation. Research on this issue is still in its embryonic phase. We try to open the black box of design innovation how to carry out product meaning innovation through thorough analysis of design innovation capability. Using an in-depth data analysis, like EFA, CFA and model fitting with data collected from 196 southeast coastal enterprises, we have three four important findings. First, design innovation capability can be divided into technology capability, connotation design capability and denotation design capability, which have significant positive relationship with each other. Second, connotation design capability is most important to innovation performance, followed with denotation design capability, and technology capability has no direct relationship with innovation performance. Third, the effect of technology capability on innovation performance is fully mediated by connotation design capability and denotation design capability. Fourth, several managerial suggestions are proposed on how to cultivate design innovation capability, and future research suggestions proposed in the end of the paper.

Key words: design innovation, technology capability, connotation design capability, denotation design capability, innovation performance