Abstract:     The government R&D subsidy is commonly adopted to intervene and optimize the allocation of innovation capital. However, the effectiveness of R&D subsidies has been hugely controversial. Based on China′s inter-provincial panel data from 2011 to 2021, this study used threshold regression models to find the optimal scale of R&D subsidies and examined whether intellectual property protection can enhance the role of R&D subsidies in alleviating innovation capital misallocation. The findings are as follows: (1) The effect of R&D subsidies on alleviating the misallocation of innovation capital is marginal diminishing. Once R&D subsidies exceed a certain threshold, the alleviating effect will be greatly weakened or even fail. However, more than 60 percent of provincial-level regions have not yet reached this threshold. Therefore, R&D subsidies can still be used as an effective innovation intervention strategy in China. (2) The effect of R&D subsidies in alleviating the misallocation of innovation capital is more significant in areas with insufficient allocation of innovation capital. (3) Strengthening intellectual property protection is conducive to enhancing the effect of R&D subsidies on alleviating innovation capital misallocation, and this effect is greater in the eastern region. This study will provide a theoretical basis and practical guidance for better playing the role of R&D subsidies and optimizing the allocation of innovation factors.

Key words: R&D subsidy, innovation capital misallocation, intellectual property protection, optimal subsidy scale