Abstract: Product variety decisions become an important topic in mass customization environment. The increasing R&D capability can support product innovations. With the increasing product variety, the investments on a single kind of products may be decreased, and the R&D capabilities may be also impacted. The relationships between product variety decisions and R&D capability improvement can be impacted by the kinds of R&D capabilities, the process of R&D improvement, etc. In order to analysis the relationships between them, a regression model was built with an aim at improving the economic performance of enterprises. A survey was conducted in Shanghai high-tech enterprises in 2017. The results show that the moderation roles of product variety level decisions on R&D capabilities may be different with the changes in R&D capabilities, industrial characteristics, and the goal of long-term or short term in economic performance. In the short term, the product variety has positive moderation effectiveness on the relationships between exploratory innovation output and economic performance in the industries with low product variety; product variety has negative moderation effectiveness on the relationships between exploitative innovation output and economic performance in the industries with high product variety. In the long term, the moderation effectiveness is opposite to the short term. The transformation mechanism of long-term and short-term different effects lies in the characteristics of the mechanism design of R&D investment based on economic performance. Based on the research results, different suggestions are given for the long-term and short-term economic objectives of different types of R&D capabilities. To ensure the positive effect of product variety on the R&D capability improvement mechanism, it is suggested that enterprises establish R&D investment in proportion to the product variety level.