Abstract: Aim To study the incentive mechanism for inducing the enterprises to invest in making technology innovation by means of R&D funds being subsidized by the state. Methods The Chinese State and its enterprise's investment in making technology innovation was compared with that of other developed countries. The reasons why the enterprises have no enthusiasm to make innovation were analyzed briefly, and a kind of incentive mechanism was designed to solve the problem by using the mechanism designing theory and the principal agent theory. Results A kind of incentive mechanism designing for inducing the enterprises to invest in making technology innovation by means of R&D funds being subsidized by the state is improved and optimized. Conclusion Designing some incentive mechanism for the R&D funds being subsidized by the Chinese State may induce the enterprises to enlarge their investment in making technology innovation and become the main body of making technology innovation gradually.