Besides basic competitive priority (quality, cost, delivery and flexibility), innovation has been recognised as one of the primary sources of competitive advantage for manufacturing industry to compete in global markets. This paper, therefore, presents an empirical study on the relationship between firm strategy, resources and innovation performance. Drawing from the grounded theory of resource-based view, and using 218 responses from Thai production/operation managers, this paper shows that differentiation strategy had a positive relationship with both internal capital or internal resources (represented by knowledge and creativity management) and networks capital or external resources (represented by customer and supplier network). The findings also revealed that only internal capital had a positive effect on innovation performance. Finally, contributions to industry practitioner, academia and national agency in supporting and promoting innovation are presented.