Abstract: Abstract: Local search, which is an important means to improve the firm innovation performance, can maintain the continuity and coherence of the organizational routines by the search and exploitation of neighborhood knowledge. By dividing the catch-up process into the early stage and the later stage，we use structural equation model and multiple regression model to examine the mediating effect of capability reconfiguration and the moderating effect of catch-up stages on the relationship between local search and firm innovation performance. The results show that: 1) local search has a significant positive impact on firm innovation performance; 2) capability reconfiguration plays a complete mediating role on the relationship between local search and firm innovation performance; 3) the catch-up phase significantly moderates the relationship between capability reconfiguration and firm innovation performance: in the early stage of catch-up, the capability evolution has a positive effect on firm innovation performance, and the capability substitution has the negative impact on firm innovation performance; in the later stage of catch-up, the capability evolution has a negative effect on firm innovation performance, and the capability substitution has the positive impact on firm innovation performance. This study enriches the research of the mechanism of local search on enterprise innovation, verifies the important role of capability reconfiguration in firm innovation and provides theoretical guidance for the local knowledge search and innovation practice of the catch-up firms.

Key words: local search, capability reconfiguration, capability evolution, capability substitution, innovation performance