PurposeThe paper aimed to summarize innovative rules of Chinese manufacturing enterprises, and put forward some insights in optimal allocation of innovation resources and enhancing the capability of indigenous innovation, so as to overcome the innovation dilemma.Design/methodology/approachHaving diagnosed the current research of innovation flows, the authors defined the concept and stated characteristics of mainstream and new‐stream innovation. Innovation life cycle theory and technology trajectory theory were used to map two evolution patterns of mainstream and new‐stream innovation. It took weeks to stay in firms to obtain original data and interview managers, engineers, and mechanists. From the case study the authors proposed the improvement projects and opportunities for firms to overcome the “innovation dilemma”.FindingsIn the indigenous innovation process, enterprises should breed new‐stream innovation as they strengthen the mainstream innovation, view the new‐stream technology as the innovation direction, and fulfill the constant innovation in the convergent innovation and replace evolution process. Meanwhile, enterprises should take precautions both to expand and develop, and fulfill technology transition and innovation upgrade through convergent innovation. Furthermore, firms' convergent innovation, which will finally achieve the “projects‐talents‐products‐markets” collaborative innovation, should be clear about target market and project‐oriented, take the product as the carrier, and be committed to cultivate creative talents and innovative teams.Originality/valueThis paper enriches the existing theory on indigenous innovation by introducing the new concept of mainstream and new‐stream innovation. The findings would help firms to jump out from the innovation morass.