A more valid (markup wise) question would be:

<li><h3><a href="#">Link</a></h3></li>

vs:

<li><a href="#">Link</a></li>

I don't know that it will make any difference... Thing is that SEO
wise, the purpose of headings is to structure a document, to divide
the sections of content, starting from the H1 representing the main
page title, and working down the hierarchy. AFAIK, when the headings
are used to break up and structure the content on a page, they become
a lot more useful to search engines.

Regards,
Mark

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