Using newly available representative longitudinal data for German manufacturing enterprises over the period 1999 to 2006 this study presents the first comprehensive empirical evidence on subsidized and non-subsidized firms in East and West Germany. The share of subsidized firms in all firms was considerably larger in East Germany than inWest Germany in every year. In both parts of Germany many firms with subsidies receive only a small amount per employee, while only some firms receive large amounts. Subsidized and non-subsidized firms differ with regard to size, productivity, human capital intensity, profitability and research and development intensity. It is shown that subsidized firms had a higher intensity of research and development before receiving subsidies. We find no evidence for a positive causal effect of subsidies on any dimension of firm performance.