Abstract: using governor's turnover data match with the data of Chinese manufacturing firms about business environment quality provided by World Bank, this paper empirically explore the relationship between governor's turnover, bank credit and firm R&D investment. We find that both governor's turnover and bank credit significantly promote firm R&D investment. In addition, governor's turnover which is a strong exogenous shock strengthens the positive effect of bank credit on firm R&D investment. However, both governor's turnover and bank credit have heterogeneous direct and interactive effect on firm R&D investment in firms of different sizes. the results suggest that enriching and promoting the institutions of governor's turnover have important practical implications to accelerate the implementation of innovation-driven development strategy.

Key words: governor’s turnover, bank credit, firm R&D investment, moderating effect