Abstract: Drawing upon Resource Dependence Theory and Institution Theory, this study examines how and why firms strategically respond to the governmental signal on indigenous innovation in China. Using 1250 firm-year observations collected from 359 Chinese manufacturing companies over 6 years between 2008 and 2013, we find that firms can incorporate innovation statements in their annual reports in order to respond to this signal and to show their conformity. More importantly, our study reports that governmental expectations matter to the likelihood of firms to respond. Specifically, large firms and more profitable firms that are expected to a large extent by the governments to respond are more likely to incorporate innovation statements in their annual reports. Moreover, our study examines the conditions under which firms substantively (vs. symbolically) respond to the governmental signal on indigenous innovation. We find that private ownership and lacking of slack resources lead to substantively respond to the governmental signal in indigenous innovation. Specifically, privately controlled firms and firms with lower slack resources are more likely to engage in substantive response.