This paper selects sample data of Chinese A-share listed companies from 2013 to 2022, and employs a two-way fixed effects model for empirical analysis to examine if the development of digital economy enhanced business innovation capabilities. The research finds that the development of the digital economy significantly promotes the enhancement of corporate innovation capability, with stable results. Additionally, we found that the effect of the digital economy on improving the state-owned enterprise’s innovation capability is greater than that of private enterprises, the effect on improving the innovation capability of small and medium-sized enterprises is greater than that of large enterprises, and compared to other industries, the enhancement of digital innovation capabilities in the manufacturing sector is more significant. Through mediation analysis, we found that the development of the digital economy can increase the R&D investment of corporate and thereby enhance innovation capability.