Abstract:     With more and more importance of innovation in the development and management of organizations, more attentions are given to All-Involvement Innovation (AII) of a firm. However, the human side was always viewed as “a dependent variable” of innovation and the environment as “a independent variable” in the most relevant studies. And few attentions are paid to the functional mechanism of AII, which leads to the AII failure in companies. Therefore, a conceptual model including five factors, which are Innovative Environment (IE), Individual Innovation (II), Collective Innovation (CI), AII, and Innovative Performance (IP), were set up. Further questionnaire survey was done; data are collected and analyzed statistically using the Structural Equation Model (SEM) for testing the theoretical hypotheses. The conclusion were drawn that AII cannot be simply seen as the outcomes of the IE. It is the result of the interactions of II, CI, and IE. AII decided on not only IP but also IE. At the same time, the outcomes from the positive study also test such perspectives that IE influences IP indirectly by motivating II and CI. This result was different with the general view of “IE decides directly on IP”.  

Key words: AII, functional mechanism, SEM