Abstract: Based on the core industry data of the digital economy companies listed in a stock from 2010 to 2019, a fixed-effect model is built to analyze the impact of government subsidies and tax incentives on the quality of digital corporate innovation. Results show that: government subsidies and tax preference have a significant impact on the innovation quality of enterprises; increased market competition enhances the positive effect of government subsidies on the innovation quality of digital enterprises; the promotion effect of government subsidies is affected by the degree of market competition. Increased market competition will enhance the promotion effect of government subsidies. Testing for enterprise heterogeneity found that: incentive effect of government subsidies on the quality of enterprise innovation is more obvious in non-state-owned enterprises and small-scale ones; incentive effect of preferential tax policies is more obvious in state-owned enterprises and large-scale ones. It is proposed to strengthen the government's guidance and support for the innovation of digital enterprises, give play to the synergy between the effective market and the effective government, and optimize the competitive environment of digital enterprises.