<p>Innovation is crucial for a firm’s development and requires substantial search activities for heterogeneous knowledge. Drawing on search strategies and institutional theory, this study explores the relationship between search strategies and innovation performance in high-tech small and medium-sized enterprises (SMEs) while considering two moderators of government subsidies and market-supporting institutions. Next, we empirically tested our proposed hypotheses by collecting data on 268 listed high-tech SMEs, with a total number of 1482 firm-year observations, and applied the negative binomial regression method in our analysis. Our analysis results revealed that both search breadth and depth had inverted U-shaped effects on SMEs’ innovation performance. We further found that the curves were steeper in firms with more government subsidies and flatter in firms with high levels of market-supporting institutions. The discussion includes the study’s theoretical contributions and implications for organizational management.</p>