Abstract: Based on the statistical data from 2000 to 2015 of large and medium-sized enterprises of China’s manufacturing and high-tech industries, this paper empirically analyzed the phased impact of government funds and corporate funds on the basic research and industrial development using multivariate linear regression and cross correlation analysis. Some conclusions can be draw from the study. On one hand, government funds and corporate funds have a significant negative impact on short-term basic research of enterprises, but the government funds can make a significant positive impact on the basic research of enterprises six years later. On the other hand, while current basic research of enterprises has a significant negative affect on industry development, it can make a significant positive impact on industry development six years later. In either the technical development stage or the outcome transformation stage, the government funds and corporate funds have the same impact on the basic research and industrial development, and these investments in basic research are more inclined to get short-term effect, which can easily lead to extrusion effect. Therefore, the allocation of government science and technology resources needs to target at more long-term goals and the overall improvement of industrial innovation capacity. The government should invest resources in stages as competitive fund for enterprise R&D activities instead of totally investing resources for enterprises to guide enterprises to increase the investment in basic research in order to make enterprises play main roles of technology innovation.