Abstract: Abstract：This paper investigates the impact of government funding on R&D expenditure and efficiency of private firms through the Ordered Probit Model and Zero-Inflated Negative Binomial Regression Model based on the data accruing from questionnaires to private firms in Beijing. The outcome of this research indicates that the increasing of government funding could improve firms’ R&D expenditure significantly, but insignificant to its R&D efficiency. Moreover, the R&D capability of firms could also increase the R&D expenditure significantly. Meanwhile, the cost of accruing government funding, the size of the firm and the industrial nature of the firm also have important influence on its R&D efficiency.