Abstract: Based on the current situation that more and more Chinese enterprises are doing diversified cross-industrial businesses, this paper discusses the guiding function and impact effect of the industrial policies on the unrelated diversification operations of the enterprises. The results show that when the policy supported business is the major business of an enterprise, the enterprise will be made to pay more attention to its major business by the subsidy effect of the industrial policy, and the expansion of the unrelated business will be reduced. This will not only encourage the enterprise to increase the innovation input but also reduce the business risks. However, when the policy supported business is not its main business, the industrial policy will stimulate the enterprise to have the desire of unrelated diversified operations through the market value effect. This will not increase the enterprise’s innovative input; on the contrary, the business risks will be increased. The unrelated diversified operations of the private enterprises are especially under the impact of the industrial policy.

Key words: industrial policy; unrelated diversification; financial subsidies; market expectations