This paper examines the effects of ownership types on firms’ R&D intensity and innovation performance, using a sample of 357,857 Chinese firms from 2005–2007. This study finds considerable divergence among Chinese domestic enterprises in terms of R&D intensity and innovation performance. Firms owned by the central government are the key drivers for firms’ R&D activities, while local government, private and foreign ownerships are negatively related to both R&D intensity and innovation performance. Significant divergence within government ownership category and argues that China’s institutional changes generate varied government ownership groups with different levels of resource endowment, which in turn influence firms’ R&D activities.