This paper is based on a typical case company with 50 years of history. It carefully examines the dynamic relationship between the evolutionary path of technological capability and the choice of niche market in the company through interviews, field study, history and archive study. We divide the history of the company into three stages and came to four theoretical conclusions as follows: (1) in the initial stage of the company (or the early stage of a new market entry), a successful niche firm chooses to enter an industrial section with low competition and high profitability through differentiation by the exploiting its capability of imitation; (2) in the growing stage of the company, the niche firm’s technological capability is improved due to technology diffusion, the firm tends to enter diversified niche markets.(3)in this stage, proper entering diversified market is positively related to the improvement of the firm’s technological capability, however, overentering diversified market is negatively related to the improvement of the firm’s technological capability. (4) in the mature stage of the company, niche firm acquires core technological capability via complementary asset and indigenous innovation and focuses on core niche market. Based on the aforementioned conclusions, we formulate a comprehensive dynamic evolving model between firm’s evolutionary path of technological capability and the choice of niche market.