Paradox theory has become an increasingly influential theory by advocating an integrative (both/and) approach to organizational tensions and their management. But an exclusive focus on innate tensions limits paradox scholarship only to market capitalism. To preserve paradox’s vitality, we unpack tensions into two categories – within-the-system tensions and outside-the-system tensions, with the former intrinsic to organizing and the latter inherent in macro-institutional context. An outside-the-system view of tensions helps to depict the paradoxical nature of state capitalism as its survival hinges on interdependent contradictions of politics and economics. Because of formidable state power supremacy, such latent country-level paradoxical tensions may inevitably manifest in corporate strategic decisions (e.g., innovation), reflecting the political-economic nature of firms. Based on empirical analysis of Chinese firms’ innovation from 2001-2019, we verify an outside-the-system view and identify government resources as a pivotal mechanism to rendering country-level state-business tensions into salient organizational paradoxes. We contribute to the literature on paradox and innovation under state capitalism in three ways: finding a new way of thinking about organizational paradoxes, integrating paradox and institutional complexity, and bridging political and economic views of firms.