Abstract: Taking Shanghai and Shenzhen A-share listed companies from the year of 2012 to 2017 as samples, the relationship between government subsidies and total factor productivity (TFP) of enterprises are empirically investigated, and the R&D (research and development) investment of enterprises is added into the model as a path variable to analyze the intermediary effect. The results show that (1) government subsidies can effectively improve TFP of enterprises, among which the R&D investment plays an intermediary role. (2) Government subsidies show a significant incentive effect on R&D. (3) Heterogeneity analysis of enterprises shows that government subsidies to private enterprises have the strongest promotion effect on TFP, and the intermediary effect of R&D investment is the most significant in private enterprises. Government subsidies to energy and health care industries are significantly positively correlated with TFP. Different regions lead to different contributions of government subsidies to TFP, but the overall effect is positive. Government subsidies in the south and east of China have a more significant incentive effect on TFP.

Key words: government subsidies, research and development investment of enterprises, total factor productivity