Local governments are encouraged to compete in R&D investments and activities in China’s innovation system. We aim to understand the influence of government competition on regional R&D efficiency. We are also interested in examining how the attributes of legal environment act as a moderating variable for the relationship between government competition and R&D efficiency. We developed Tobit spatial models with spatial panel data of 30 provinces of China in 2008–2016. The results show that: (1) There exists spatial dependence of R&D efficiency, and the regions with high efficiency have “spillover effect” on the surrounding areas. (2) Government competition has a significant promoting effect on R&D efficiency and/or R&D efficiency spillover. Specifically, government competition has both R&D efficiency promotion and R&D efficiency “spillover” promotion in Eastern China, only R&D efficiency positive spillover promotion in Middle-area and R&D efficiency promotion but negative spillover in Western China. (3) The impact of government competition on efficiency is affected by the legal environment, and the promotion effect of government competition only exists in good legal environment. The results of this study reveal an important way to improve R&D efficiency by establishing a new R&D competition mechanism for local government which is oriented by efficiency and ruled by the legal environment.

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