The aim of this paper is twofold: first, to explore the effects of industrial cluster on innovation capacity, and second, to study the impact of external resources on firms' innovation capacity especially under Chinese regional economic policy. This is a critical subject that lacks sufficient analysis. Through years of investment and effort, several IT industrial clusters have developed in China with Shanghai, Kunshan, Shenzhen and Dongguan the better-known examples. These IT industrial clusters were chosen for an empirical study on the disparities in China's innovation capacity. All of the innovation capacity determinants at these four IT industrial clusters were different. It was confirmed that the regional dimension of Chinese economic policy affects firms' innovation capacity in the industrial cluster. The results also show whether the regional policy differences will moderate the cluster effect on innovation.