Abstract: Based on the game model involving local governments and enterprises, this paper investigates how the changes of governments' innovation preference affect the level of market integration among the regions and its further impact on enterprise innovation during the process of local governments' goal-oriented transformation from extensive growth to innovation-driven development. Then, it provides empirical evidences for the theoretical propositions based on the data both at the company level and the regional level. The findings show that: firstly, improving the preference for innovation in governments' goal orientation can prompt local governments to abandon the regional market barriers and to promote the process of market integration; secondly, the market segmentation significantly weakens the promotion effect of innovation activities on enterprise development, thus the breaking-down of market segmentation and the improvement of market integration level is conducive to encouraging enterprises to engage in innovation activities; thirdly, the governments' innovation preferences significantly promote the innovation activities of enterprises, and in which the mediating effect of market integration cannot be ignored. The above-mentioned research conclusions provide a new idea for guiding the local governments' goal orientations, boosting the process of market integration and promoting enterprise innovation.

Key words: government target orientation, government innovation preference, market integration, enterprise innovation, market segmentation