Abstract:     Under the background of innovation-driven development strategy, the decision of enterprise innovation activity allocation has become a key factor affecting the high-quality development of enterprises in China. In this paper, a multinomial treatment effects model was used to explore the impact of R&D investment and the government-enterprise interaction on corporate profits in the process of economic transformation. It was found that: (1) There is a significant complementary effect between R&D investment and government-enterprise interaction. (2) Compared with firms that neither invest in R&D nor interact with the government, only investing in R&D significantly suppresses firms′ profits. However, frequent interaction with the government without R&D investment does not have a significant effect on firms′ profits. Only when firms invest in R&D and interact with the government at the same time do firms′ profits increase. (3) Further tests revealed that the complementarity between R&D investment and government-enterprise interaction is weakened in regions with a high degree of property rights protection, a low tax burden, or abundant resources. This study has extended and enriched the related research on the allocation decision of enterprises′ innovation activities, and it will provide some empirical evidence on how enterprises can improve their market competitiveness, and thus it is of great significance for realizing the goal of high-quality development of enterprises in China.

Key words: R&D investment, governmententerprise interaction, corporate profit, enterprise activity allocation