In this paper we analyze how the supplier’s innovation and the technological distance influence the manufacturer innovation. The results from listed manufacturing companies in China show that: the supplier innovation is shown to have a significant positive impact on the manufacturer’s exploitative innovation, but have a significant negative impact on the manufacturer’s exploration innovation. Technological distance has a significant positive impact on manufacturer’s exploration innovation. Technological distance has a significant negative impact on the manufacturer’s exploitative innovation. Moreover, we found that technological distance inhibits the firm’s integration of the supplier’s knowledge when firms focus on exploitative innovation. Technological distance positively moderates the relation between the supplier innovation and manufacturer exploitative innovation.