Abstract:There is widespread agreement that increasing R&D generally is critical to improve the innovation capability of Chinese enterprises. The pathways from R&D to innovation, however, is a more ambiguous question. To make it clear, this study, first, explores mechanisms linking R&D and innovation, and it indicates that striking a balance among basic research, applied research and experimental development is necessary for enterprises to build sustainable competitive advantages. Second, a systematic comparison of R&D management between US and Chinese enterprises is conducted. The results show that US enterprises have significant advantages in R&D investment, R&D intensity and the share of R&D in national system. The share of different R&D activities of US enterprises is more balanced. Finally, some suggestions are put forward, and special attention should be paid to government funding support to enterprises, preferential tax policies, and benchmarking best practices.