Yardstick competition with GDP as the performance evaluation indicator between local governments has stimulated the enthusiasm of local governments to develop economy and improve their ability to obtain economic resources. With the increasingly obvious defects of the original indicators and China’s increasing emphasis on innovation-driven economic growth, changing performance evaluation indicators and repositioning yardsticks on yardstick competition between local governments are very important for China’s high-quality economic and social development. Given this, based on panel data of 105 cities in the Yangtze River Delta and its neighboring areas from 2011 to 2018, this paper uses a double difference model to evaluate the impact of the Yangtze River Delta integration policy planning on regional innovation, and discusses competitive strategy of selection of performance evaluation indicator and yardstick on competitions among local governments. The results show that neighboring cities of the Yangtze River Delta urban agglomeration have included innovation in their core performance indicators for yardstick competition, while cities in the Yangtze River Delta still use GDP as their core performance indicator. Under the incentive of the Yangtze River Delta integration policy, the growth rate of innovation in neighboring cities of the Delta is higher than that in cities of the Delta, producing an effect of “receiving recognition only from outsiders”, and the result that innovation can effectively promote the promotion of local officials. Further analysis shows that yardstick selection should satisfy proximity and benchmarking. This study reveals that in order to promote yardstick competition among local governments and its effectiveness under intergovernmental economic and fiscal decentralization framework of China, we should pay attention to the long-term and innovative nature of performance evaluation indicators, and prevent this competition from expanding, and promote social governance through yardstick competition.