The information technology revolution and the international vertical division of labor have changed the manufacturing pattern and basis of competition in the global manufacturing industry. The traditional competition among firms is gradually evolving into the competition among supply chains. Based on the empirical analysis of A-share manufacturing listed companies in China from 2011 to 2018, we find that firm innovation is related with supplier concentration negatively, but the effect will be weakened in firms with higher market position. However, the firm innovation is related with customer concentration positively, and it will be strengthened among firms with higher market position. The release of financial constraint is the mechanism of the relationship between supply chain and innovation activities. The research provides literature contribution and practical guidance for firms to engage in innovation activities according to their own market position under the strategy of innovation-driven development.