Purpose/SignificanceInternal and external governance effects are important factors that affect innovation ability of innovative enterprises. Therefore, it is necessary to study the relationship between internal and external governance factors and innovation ability.

Method/ProcessThis paper takes 1180 samples from 590 companies listed on the GEM in 2016-2017 as the research samples, and analyzes empirically the relationship between ownership structure (including equity concentration and equity balance), product market competition and enterprise innovation ability.

Result/ConclusionThe results show that the appropriate equity structure is positively related to the innovation ability of enterprises, equity checks and balances have no obvious relationship with enterprise innovation ability, and a good market competition environment can effectively promote the innovative ability of enterprises. Therefore, the shares of small and medium-sized shareholders can be properly increased; equity incentive to senior managers can also be encouraged in order to give full play to their innovation enthusiasm and the synergistic effect of external market competition mechanism on corporate governance efficiency. Besidesformulating laws and regulations to adapt to the listed companies on the GEM, the regulatory authorities should regularly check and evaluate their governance effect.