Abstract: On basis of a perspective of dual conflict, the paper establishes a theoretical construct in hope of dynamically elaborating how the diversity of TMT functional background affects firm innovation under the integration of CEO’s characteristics. Based on the data from public listed companies in Shanghai and Shenzhen Stock Exchanges in China from the year 2009 to 2016, by employing Poisson model, the paper systematically analyzes and empirically examines the relationship between the diversity of TMT functional background and firm innovation performance, and the moderating effect of CEO characteristics on capability, power and relationship dimensions. The results indicate that, to begin with, the diversity of TMT functional background exerts a negative effect on firm innovation performance. Besides, the richer CEO’s functional background is and the longer CEO’s tenure and that of TMT members overlaps, the negative effect of TMT functional background on firm innovation performance is weaker. Additionally, the more powerful CEO is, the negative effect is stronger. The paper adopts a dynamic theoretical construct instead of a stable one which is conducive to unfold the “blackbox” of “group diversity—firm outcome”. Besides, the findings are helpful for those firms which urge to improve firm innovation.