Government　subsidies　have　a　direct　impact　on　firms＇　innovation　strategies.　The　game　relationship　between　the　government,　the　subsidized　firm　and　its　competitors　under　different　subsidy　strategies　affects　firms＇　innovation　behavior　and　thus　innovation　performance.　This　paper　uses　a　dynamic　evolutionary　game　theory　approach　based　on　cost-benefit　differences　to　analyse　the　mechanisms　by　which　government　subsidy　strategies　affect　firms＇　innovation　strategies.　It　is　found　that　the　marginal　benefits　of　a　firm＇s　innovation　strategy　will　directly　affect　the　game　outcome,　indicating　that　the　choice　of　innovation　strategy　depends　on　the　maximization　of　individual　firm＇s　interests.　At　the　same　time,　a　firm＇s　innovation　strategy　is　influenced　by　the　firm＇s　own　innovation　ability　and　competitors＇　innovation　strategy,　and　there　are　two　game　equilibria.　Government　subsidies　have　a　positive　contribution　to　the　innovation　strategy　choice　of　subsidized　firms,　but　have　a　crowding-out　effect　on　non-subsidized　competing　firms.　The　strength　of　the　penalty　(the　efficiency　of　the　implementation　of　government　subsidies),　the　marginal　revenue　of　the　subsidized　firms＇　rational　use　of　government　subsidies　and　the　competitors＇　strategic　choices　will　directly　affect　the　game　outcome.　Copyright　©　2022　Ding,　Wang,　Liu　and　Peng.