Abstract: Based on the institution-based view and innovation literatures, this paper theoretically discusses and empirically examines the non-linear effects of firms’ formal institutional capital and informal institutional capital on firms’ innovativeness, their potential heterogeneities, and their contingencies upon appropriability regime as well. The empirical findings of the survey data from 303 paired sample firms in China indicate that: First, firms’ formal institutional capital have an increasingly positive effect on their innovativeness, whereas firms’ informal institutional capital exert a decreasingly positive effect. Second, appropriability regime strengthens the positive effect of formal institutional capital on innovativeness, while weakens the positive effect of informal institutional capital on innovativeness. This paper provides insightful theoretical implications for firms’ innovativeness and their capital utilization.