Much　environmental　studies　have　widely　examined　the　relationship　between　environmental　regulation　and　innovation,　but　scholars　do　not　reach　a　consensus.　Different　from　the　homogeneous　and　static　view　in　prior　studies,　this　paper　uses　a　heterogeneous　and　dynamic　perspective　by　splitting　the　relationship　of　environmental　regulation　and　innovation　into　two　sub　processes,　from　environmental　regulation　to　portfolio　change　of　technology　sourcing　channels,　then　to　innovation　outputs,　and　considering　the　moderate　effect　of　management　efficiency　in　the　second　sub　stage.　Using　a　dataset　of　36　Chinese　industrial　sectors　between　2009　and　2014,　we　find　that　firms　respond　to　strict　environmental　regulation　by　shifting　the　portfolio　of　technology　sourcing　channels　(dissimilarity),　but　such　kind　of　dissimilarity　decreases　innovation　outcomes.　Furthermore,　it　is　found　that,　in　efficient　industries,　the　degree　of　negative　effect　of　the　portfolio　change　of　technology　sourcing　channels　on　innovation　outputs　is　lower　than　in　inefficient　industries.　Taken　together,　we　thus　propose　a　process　view　of　the　environmental　regulation-innovation　relationship.