Background. Driven by the Silk Road Economic Belt idea, Xinjiang Uygur Autonomous Region can fully play its regional advantages and innovate the open economic system. It can transform and upgrade industrial structures with strong regional characteristics and advantages in Shihezi. Objective. The purpose is to explore the impact of knowledge-based employee incentive mechanism (EIM) on innovation performance. It is hoped to innovate the knowledge-based worker (KBW) management in Shihezi enterprises. Methods. Based on the psychological theory, the actual production, and living conditions in Shihezi, a questionnaire survey is conducted on the KBWs of typical enterprises in Shihezi. The questionnaire is designed by considering the characteristics of KBWs in Shihezi City under the Development Strategy of Western Chinese Cities. In addition, relevant structural equation models and hypotheses are proposed to comprehensively explain the relationship between psychological capital (PsyCap), EIM, and employee innovation performance (EIP). Results. Among the KBWs of Shihezi enterprises surveyed, the proportion of male and female employees is basically balanced, and both groups have bachelor’s degrees or above. They are mostly young, with a relatively short working year. Most employees are in the rising stage of career development. The overall scores of KBWs on the PsyCap, EWM, and EIP scales are all above 3.5, a high overall score. Model analysis and hypothesis verification show that Shihezi knowledge-based EIM significantly affects EIP and PsyCap. The PsyCap has a positive impact on EIP. The KBWs’ PsyCap plays an intermediary role in EIP. Conclusion. The research results provide an objective reference for Shihezi enterprises to improve the innovation performance of KBWs. It enriches the theoretical research of Shihezi enterprise innovation and provides a theoretical basis to improve collaborative innovation performance.