Abstract: Based on institutional theory，this paper theoretically discusses and empirically examines the functional mechanisms of firm institutional capital on radical innovation, their potential heterogeneities, and their contingencies upon external environment as well. The empirical results of the survey data from 165 paired firm samples and 5 firm cases in China show that: First, Financial aid has a higher positive effect on radical innovation than the policy support does; business tie has a higher positive effect on radical innovation than the political tie does. Second, institutional efficiency negatively moderates the relationship between policy support political tie and radical innovation, but positively moderates the relationship between business tie and radical innovation. This research provides some theoretical implications for firm’s radical innovation and their institutional capital utilization.