Abstract: Enlightened by Adner’s study on influences of technological challenges’ on innovation ecosystem, the paper takes Hangzhou security surveillance system and Wenzhou shoemaking industrial clusters as cross case studies to explore how position of technological challenges along industrial chain affect industrial clusters across different technological level. By semi-structured interviews, second-hand data and peer-reviewed journal keyword analysis, the paper describes the industrial chain structure and technological change of the clusters mentioned above, and focus on how the upstream component suppliers and downstream complementors’ technological challenges influence focal firm and cluster performance. Findings are as follows: first, in context of high-tech industry, upstream component suppliers’ technological challenges are positively related to focal firm and cluster performance, while downstream complementors’ technological challenges have reducing effects. Second, in context of low-tech industry, no significant relationship is found between upstream component suppliers’ technological challenges, local firm and cluster performance, while downstream complementors’ technological challenges facilitates focal firm and cluster performance.