Abstract: Promoting innovation in the manufacturing industry and promoting high-quality development of the industrial economy are important policy guidelines of the country. Taking the most representative industrial enterprises above designated size in the industrial economy as the research object, innovation modes are divided into two categories: product or process innovation and organizational or marketing innovation. Panel data from 31 provinces in China (excluding Hong Kong, Macao, and Taiwan) for a total of 7 years from 2016 to 2022 are selected, and a panel binary choice model is used to empirically analyze the internal and external influencing factors of industrial enterprise innovation mode selection in each province, revealing the specific reasons why industrial enterprises in each province choose different innovation modes. It is found that: Firstly, the higher the regional economic level and local R&D manpower investment, the more inclined the industrial economy is towards organizational or marketing innovation. The more innovative achievements there are in the local area, the more inclined the industrial economy is towards product or process innovation. Secondly, the higher the proportion of large enterprises, the more inclined the industrial economy is towards organizational or marketing innovation. Thirdly, industrial enterprises choose too many organizational or marketing innovation modes, and there is a phenomenon of market failure in industrial economic innovation. Based on this, suggestions are made: To achieve more product or process innovation results, policy makers should introduce policies to restrict the monopoly of large enterprises and encourage the development of small and medium-sized enterprises. Policy makers should adopt policy measures such as bank credit, fiscal subsidies, and tax incentives to reduce the cost of product or process innovation for industrial enterprises and compensate for market failures.