When do government subsidies promote collaborative innovation, and under what conditions do they lead to policy failure? Using panel data on Chinese A-share new energy vehicle firms from 2011 to 2023, this paper develops an industrial organization model and systematically examines the nonlinear effects, transmission mechanisms, and boundary conditions of government subsidies. The results show that government subsidies are neither uniformly effective nor uniformly ineffective, but rather constitute a policy instrument characterized by pronounced threshold dependence and contextual constraints: they effectively promote collaborative innovation when subsidy intensity remains within an appropriate range and market conditions are favorable, whereas once a critical threshold is crossed or institutional conditions are mismatched, their marginal effectiveness declines, giving rise to features of policy failure. Specifically, government subsidies exert an overall positive effect on collaborative innovation; the relationship between subsidies and collaborative innovation exhibits a single threshold, with the coefficient below the threshold being approximately 4.2 times that above it, while both coefficients remain positive, indicating that the subsidy effect declines markedly rather than turning negative as subsidy intensity moves from the activation zone to the saturation zone. Subsidies, on the one hand, reshape market structure through changes in the firm size distribution and thereby affect collaborative innovation, and, on the other hand, influence resource allocation efficiency through market structure; regional market segmentation and barriers to factor mobility significantly weaken the transmission from market structure to collaborative innovation, thereby recasting market structure from a static constraint into a dynamic transmission mechanism. The moderating effect of digital infrastructure is conditional, being positive in environments of high information transparency and among firms with strong digital capabilities, but turning negative in environments of low information transparency and institutional conflict. By replacing the linearity assumption with threshold dependence, static constraints with chain mediation, and universal empowerment with conditional moderation, this paper develops a three-dimensional analytical framework encompassing policy intensity, market structure, and digital context, and derives policy implications for phased and differentiated subsidies, structure-oriented market reform, and coordination between digital development and institutional arrangements.