| Abstract | Using the sample of Chinese A-share listed companies in patent application data from 2001 to 2010, we analyzed the influence of industry policy on enterprise innovation activities and its internal mechanisms. The research found that when the firms were incentive by industry policy, the number of their patent applications increased significantly. However, this phenomenon occurred just in the group of non-invention patent applications, which means that these firms pursued “innovation by numbers” and ignored “the quality of innovation”. When firms expected that they would obtain more subsidies and tax incentives, the number of their patent applications, especially the number of their non-invention patent applications increased significantly, which means that the support of industry policy induced enterprise to innovate for“support seeking”. Then, to further analyze these phenomena above, we divide the firms into SOE group and non-SOE group, as well as high-tech industry group and non- high-tech industry group. The result of the further analysis is that these phenomena above were significant in SOE group and non- high-tech industry group, but not significant in non-SOE group and high-tech industry group, which indicated that industry policy could not inspire substantial innovation, and the enterprise innovation aiming at “support seeking” was strategic innovation. However, the more the number of the invention patent applications increased, the more the company's market value improved, which means that did substantial innovation could promote the development of enterprises. This paper argued that when Chinese government formulates his industrial policies, he should avoid as far as possible to base on the government's choice when allocating the resources. Instead, he should preserve the market mechanism, and make use of the market competition to stimulate innovation, in order to promote industrial restructuring and upgrading, and to achieve economic development for a long run. |