Innovation is a strategic issue which needs to be aligned not only internally with overall business goals but as well externally with the environment. Suppliers innovation processes particularly are confronted with manufactures' pre-settings related to product and process objectives, frame specifications, and target prices. We refer to those aspects as supply-chain rigidities. This study aims to explore the complex setting of strategic impulses for innovation and market success. We clarify how suppliers' innovation strategy types and their hereby created dynamic internal capabilities, namely an innovation orientation and a planning capability, cope with different degrees of supply-chain rigidity and support market success. A survey on 241 small and mid-sized companies in the high-tech sector reveals that a strategic design towards innovation increases market performance both directly and through the achievement of "hard" and "soft" dynamic capabilities. Performance effects are dependent on the supply chain integration. The deliberate strategy type seems suitable for high levels of supply chain rigidity. The emergent strategy type supports market performance through intra-firm innovation orientation under high ambiguity of supply chain requirements. Our results may assist firms in finding the right innovation strategy type and dynamic capability development with respect to their overall setting in the supply chain.