Abstract: External collaboration is important for incumbent firms to enlarge necessary new knowledge elements and recombination paradigm for innovation, while internal knowledge networks can affect its effectiveness. We distinguish two types of external collaborations, academic collaboration, and industry collaboration, and analyze how their effectiveness on innovation was affected by the structure of internal knowledge networks. Employing a dataset of 323 listed companies in the communication industry and pharmaceutical industry in China, from 2012 to 2017, we found that firms with external collaborations, particularly firms with more academic collaborations—have a higher innovation performance than their non-connected counterparts. Firm’s internal knowledge recombination potential, measured by the weighted clustering coefficient and average path length of the firm’s internal knowledge network, will weaken the impact of academic collaboration, but contribute to the impact of industry collaboration. A firm’s internal knowledge coordination cost, measured by average ties per inventor in the firm, can weaken the positive relationship between industry collaboration and firm innovation.