Abstract：The sustainability of innovation in small and medium-sized enterprises depends on R&D investment, but due to the limitation of its own scale, external financing is the key to innovation investment. Based on the sample of NEEQ enterprises in 2014-2019, this paper analyzes the difference of equity control and debt financing on SMEs innovation, and explores the effect of different equity circulation and concentration on the impact path. Empirical test shows that equity control is conducive to R&D investment of NEEQ enterprises, which is affected by the degree of equity circulation and the level of equity concentration. The higher the degree of equity circulation and the lower the concentration, the more positive effect of equity control on R&D expenditure. Further research finds that this effect is more especially significant in high-tech SMEs and SMEs in the eastern region. Therefore, SMEs should choose to raise the innovation ability by financing and trading equity in capital market. Policy makers should encourage SMEs, especially high-tech SMEs, to enter the NEEQ market for equity financing. While expanding QFII, the NEEQ market should set up an evaluation system with the help of the restriction of electronic trading system, appropriately relax the off-line investment of non-QFII under the condition of maintaining market stability, and increase trading participants to promote equity circulation and diversification.

Keyword: small and medium-sized enterprises; R&D investment; innovation investment; equity control; debt financing; financing constraints;