The Impact of Government Subsidies on Firm Innovation Input Performance in China: The Moderating Effect of ESG Performance

Government subsidies serve as a crucial mechanism for incentivising corporate innovation, yet their efficacy in enhancing innovation performance within Chinese firms remains uncertain. Drawing upon signalling theory and agency theory, this study examines data from Chinese A-share listed corporations (2016–2023) to evaluate how government subsidies influence firms’ innovation input performance, whilst investigating ESG performance’s moderating function. Empirical findings reveal that government subsidies significantly enhance innovation input performance, though composite ESG performance demonstrates no moderating effect. Subsequent analysis of individual ESG dimensions discloses that environmental performance weakens the positive association between government grants and innovation inputs. Rigorous robustness checks confirm result validity. This research advances theoretical understanding of subsidy-related signalling mechanisms and offers practical insights for policymakers about subsidy allocation and innovation strategy.