By embedding in the Chinese context, this paper studies the influence of debt structure on input and output of innovation. Using a sample of state-owned enterprises (SOEs) of Chinese manufacturing during 2005-2007, we examine the relationship between debt structure and innovation input and output with the 3SLS method. The results show that floating debt is negatively related to innovation input, but positively related to innovation output. On the contrary, long-term debt has no relation with innovation input, but negatively related to innovation output. The innovation of high investment and low efficiency of the state-owned enterprises shows that the principal-agent conflicts are the main contradiction of the state-owned enterprises’ agency problem. From the point of view of innovation efficiency, increasing the ratio of high floating debt and reducing the ratio of long-term debt in the financing structure, the risk of debt abuse can be cut down and the innovation performance can be improved.