Abstract: Under the analytical framework of heterogeneous enterprises, this paper constructs a theoretical model of trade liberalization and innovative decision-making of enterprises under different degrees of financing constraints. The results show that along with the deepening of globalization, the heterogeneity of financing constraints in different firms is continuously expanding. The enterprises with higher degree of financing constraints can hardly obtain external financing support, so that the stimulation for technological innovation is greatly reduced. The empirical results with enterprise data of China’s manufacturing industry show that financing constraints can weaken the motivating effect of trade liberalization on technological updating and that the incomplete capital market would restrict the gains from trade brought about by trade liberalization. Thus in the situation of speeding up the construction of open economic system, the government should improve the financing environment for the enterprises as soon as possible, so as to maximize the opportunities of trade liberalization and stimulate enterprises’ innovation vitality.

Key words: trade liberalization; financing constraints; enterprise innovation