Taking China’s A-share listed companies from 2007 to 2020 as samples, and empirically examines the phenomenon of peer effect on corporate innovation investment decisions under economic cycle fluctuations. The study finds that there is an industry-level peer effect on corporate innovation investment decisions, and under the effect of economic cycle fluctuations, the peer effect of corporate innovation investment presents a counter-cyclical change. That is, the peer effect of corporate innovation investment is more significant when the economy is in a downward period compared to an upward period. Robustness tests using the Heckman two-stage model and replacing key variables still support the conclusion. Further, the heterogeneity analysis based on the ambidextrous innovation model and the degree of industry competition reveals that the peer effect of innovation investment and its counter-cyclical changes are more significant for firms that engage in exploratory innovation or are in industries with a high degree of competition. In terms of economic consequences, the peer effect of innovation investment decisions and their counter-cyclical variation can improve the total factor productivity of firms.