Abstract:    In recent years, with the increase of R&D investment, the innovation ability of Chinese enterprises has been significantly improved. However, compared with developed countries, China still has a significant gap in R&D investment. 
   Real estate market in China maintains relatively strong growth over the last 20 years. The marketization of China′s housing market and land market has attracted more and more investment from non-real-estate enterprises. Like R&D investment, real estate investment requires large amount of time, money and expertise. Therefore, investment in R&D and real estate may be mutually exclusive, competing for limited resources. 
     Many studies have found that real estate has become an important and attractive investment opportunity for non-real-estate enterprises in China. However, existing literatures that research the correlation between real estate investment, R&D investment and operating efficiency are limited. In addition, macro data is used in most of existing studies, which restrict deep understanding of enterprise behavior.
    The paper focuses on enterprise innovation behavior, exploring the relationship between real estate investment and enterprise innovation and R&D investment. The empirical analysis is based on micro panel data of listed industrial enterprises in China from 2000 to 2016, including 2249 enterprises. The regression results show that the housing price growth rate has a significant impact on real estate investment decisions of non-real estate enterprises, among which the real estate development and sale business is more affected. The result is robust after selective bias is alleviated by Heckman method. Furthermore, empirical analysis separates the two approaches of investing in real estate with the help of propensity score matching method and grouped regression. Result shows that both investing approaches have significantly reduced the intensity of R&D input. However, operating efficiency is not influenced in this case. Lastly, it is demonstrated that the above crowding-out effect exists for a long time, even when real estate has become one of the most dominant business for non-real-estate enterprises.
     Conclusions of the paper provide a theoretical foundation for government to take targeted measures to encourage innovative R&D investment and regulate real estate market. In order to achieve the goal of Made-in China 2025, the government should guide enterprises to invest reasonably in research and development. For strategic emerging industries, the government should adopt incentive policies such as widening financing channels and reducing financing costs to enhance the motivation of enterprises to carry out research and development projects. On the basis of abiding by laws, standards and regulations, enterprises can normally carry out real estate investment activities, which should be recognized by the public. However, the government should review the qualifications of these companies in transition. If they lack a competitive advantage in the real estate industry and only pursue short-term profits while ignoring long-term value, they should stop. Only through this process can we make more effective use of social resources and coordinate the real estate market with other industries.

Key words:  real estate market, real estate investment, R&D investment