This paper analyzes the effects of the subsidies provided by the Japanese Small and Medium Enterprise Agency on the competitiveness of small and medium-sized enterprises (SMEs) in service sectors in Japan. We construct a dataset that combines firm information data from Tokyo Shoko Research with a list of firms applying for the subsidies provided by the Small and Medium Business Administration, and use a difference-in-differences approach with propensity score matching. The results show the following two findings. First, we find statistically significant positive estimates on the sales and the number of employees after the end of the subsidy project, while observing some pre-treatment trends. Second, the effect for firms collaborating with universities or public research institutions is not statistically different from that for firms collaborating with other institutions.