Abstract:This paper drew on the sample of firms listed on the growth enterprises market (GEM) during 2010-2018 and established an evaluation system to addressed the relationship between innovation and valuation. The findings in our study indicated that: There exists a direct relationship between valuation and innovation. Increased innovation output, investment or efficiency was correlated with a higher price to earnings (PE) ratio. Among all the three variables estimating technological innovation, innovation investment was the most important one .Innovation composite index will also result in a high PE ratio. The mechanism test suggests that financial performance, investor attention played a mediating role in this. Furthermore, there was a heterogeneity effect in the relationship between innovation and PE, that’s to say, the positive correlation was stronger in high-tech enterprises, but only existed in innovation investment. This study not only enrich literatures between innovation and valuation, but also verify the driving power of innovation on valuation, which can stimulate companies to innovate and offer theoretical backup for the outlines on national strategy for innovation driven development.