Abstract: Abstract: Government subsidies play a crucial role in enhancing the innovation level and growth of startup companies, and they also have a significant impact on the transmission of hidden information to the market. This article utilizes data from Hubei Province's incubators for the years 2019-2021 and employs the signaling theory to analyze the mechanism of government subsidies on the innovation performance of entrepreneurial firms within these incubators. The research findings are as follows: 1. Government subsidies have a positive impact on the innovation performance of entrepreneurial firms within incubators. 2. Venture capital plays an intermediary role in the positive relationship between government subsidies and the innovation performance of entrepreneurial firms within incubators. 3. Special considerations for incubators within national high-tech zones: The study mentions that for incubators located both within national high-tech zones and specialized incubators, the effect of government subsidies on improving innovation performance through the intermediary role of venture capital is not significant. In summary, this research provides valuable insights for government policy adjustments concerning incubators and informs the strategic choices of incubators for their own development. Governments may consider encouraging the flow of venture capital into startup companies and incubators to accelerate innovation and growth. Additionally, for specific types of incubators, more tailored policy measures may be needed to better support innovation and development. These findings contribute to optimizing the startup ecosystem and fostering economic growth.