The medical industry faces rapid changes and more competitive environment in recent years, so innovation has become the key element to improve competitive advantage for hospitals. We investigated the determinants of technological innovation and its influence on hospital performance through samples in Taiwan. We conducted a cross-sectional study and the data were obtained from four secondary databases: "Taiwan Hospital Annual", "Statistical Yearbook of the Interior" of the Taiwan Hospital Association, and "registry for contracted medical facilities" and "registry for contracted beds" of National Health Insurance Research Database in 2005. We adopted structural equation modelling to analyze our research model. We found that hospital scale affects technological innovation positively, the level of technological innovation of private hospitals is higher than that of public hospitals, and the technological innovation of non-teaching hospitals is also significantly higher than that of teaching hospitals. Results also showed that technological innovation influences ambulatory performance, emergency performance, and inpatient performance positively. This research confirmed that market factors failed to have a direct impact on the technological innovation of hospitals; hospital scale, hospital ownership and teaching status are the critical factors affecting technological innovation. Finally, we confirmed that technological innovation indeed affects hospital performance.