This paper examines the effect of government innovation subsidies from the perspective of spatial correlation, and uses the spatial panel model to analyze the impact of government innovation subsidies on China's industrial R&D expenditures based on provincial panel data from 2001 to 2016. The results show that the government's innovation subsidies have significantly stimulated the province's own industrial R&D expenditures, and at the same time, it has positively affected the industrial R&D expenditures of neighboring provinces and cities. After controlling the endogenous problems, the conclusion is still valid. In addition, under different ownership and innovation levels, there are differences in the spatial impact of government innovation subsidies on industrial R&D expenditures. According to the research conclusions, this paper proposes four policy recommendations to increase government innovation subsidies and fully consider spillover effects, integrate government incentives and market drivers, and create an environment that supports successful innovation.