Abstract: Combined with our current “going global strategy” and innovation-driven development strategy, this paper discusses the effect of internationalization of strategic emerging industry on innovation and how different government subsidies could influence this relation. This research shows that internationalization of strategic emerging industry could facilitate innovation in firms,and compared to smaller firms, internationalization of larger firms leads to greater improvement in innovative ability; although government subsidy may prompt the innovative ability of strategic emerging industry, it will diminish the driving force that internationalization brings about to innovative ability of firm; the study of the subdivisions of government subsidy demonstrates that direct government subsidy diminishes the driving force that internationalization brings about to innovative ability of firm, however, indirect government subsidy facilitates it. The above conclusions expand the theoretical analysis of factors that relates to innovative ability of firm, which is also illuminative to government on effective innovative resource distribution and improving the innovative ability of internationalization firms.

Key words: government subsidy, internationalization strategy, innovative ability of firm, strategic emerging industry