The　paper　propose　a　theory　framework　at　the　firm　level　of　the　sources　of　global　competitiveness　and　how　innovative　capability　results　in　the　competitive　advantage.　The　framework　identifies　three　interdependent　innovative　capability　dimensions,　which　offer　insight　into　the　sources　of　sustainable　international　competitive　advantages　over　time:　technological　capability,　managerial　capability　and　resource　exploiting　capability.　Then　the　paper　analysis　the　linkage　of　these　three　components　of　innovative　capability　with　firm＇s　competitiveness　in　an　international　context,　and　describes　how　a　firm　can　develop　and　sustain　competitiveness　through　the　operation　in　the　environment　of　globalization.　Finally,　the　empirical　analysis　is　done　to　proves　the　hypothesis　of　the　interaction　pattern　between　innovative　capability　and　global　competitiveness　based　on　data　from　213　firms　in　Beijing　area.　The　study　reinforces　the　importance　of　innovative　capability　composition　in　internationalization　decision-making　and　suggests　further　research　in　this　context.　(c)　2006　PICMET.