Government subsidies for innovation are critical policy instruments but often suffer from inefficiencies due to severe information asymmetries between funding agencies and applicant firms. This study leverages the staggered introduction of high-speed rail (HSR) in China as a quasi-natural experiment to examine whether improved physical infrastructure can alleviate such frictions. Using panel data of 3,296 listed firms across 281 prefecture-level cities from 1999 to 2021, we find that the operation of HSR significantly increases the likelihood of firms receiving government innovation subsidies. This effect is especially pronounced for small firms and those with a high proportion of intangible assets, where information opacity is more severe. Moreover, firms located in HSR-connected cities demonstrate stronger post-subsidy performance, suggesting that better information environments enabled by HSR enhance the selection and effectiveness of subsidy allocation. Our findings highlight an important and previously overlooked mechanism: by reducing spatial-temporal distance and facilitating face-to-face communication, transportation infrastructure plays a critical role in converting firm-specific private information into accessible public knowledge. This enhances governmental screening accuracy and subsidy efficacy. The study contributes to literature on innovation policy, infrastructure economics, and information asymmetry, and offers practical insights for designing more effective innovation support schemes in emerging economies.

Chenxi Zheng, Yu Chen, Yao Liu. Reducing Information Frictions via High-Speed Rail: Infrastructure-Driven Efficiency in Government Innovation Subsidies. Academic Journal of Business & Management (2026), Vol. 8, Issue 5: 92-104. https://doi.org/10.25236/AJBM.2026.080513.

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