Abstract: Indigenous firms in developing countries with large domestic markets like China have unique advantages: on the supply side, there are multiple knowledge and technology sources arising from the coexistence of multinational firms and state-owned firms with technologies at the medium-high level and many private firms with technologies at the low level; on the demand side, there are multiple market segments of large size from high-end to low-end. Given the significance of these two industry characteristics for catch-up, technology ladder and market ladder are proposed respectively to reflect the continuity in technology levels and price levels on the whole for firms in an industry. Using panel data analysis for a sample of Chinese manufacturing industries from 2001 to 2007, this study examines how industry structural characteristics (technology ladder and market ladder) and their interactions with technology effort (buy and make) affect productivity catch-up performance. The results indicate that market ladder and technology ladder can accelerate productivity catch-up, and these positive effects are strongest when technology effort intensity in an industry is at a medium level.