Enterprise digitalization has become a powerful engine for China''s economic innovation-driven development. Based on the data of A-share listed companies in Shanghai and Shenzhen from 2009 to 2019, an empirical study was conducted between enterprise digital transformation, innovation ability and the underlying influencing mechanism, while text recognition method was introduced to extract keywords and organize digital transformation indicators . It is found that digital transformation has significantly improved the innovation capability of enterprises. Further empirical research shows that digital transformation mainly promote the innovation ability by reducing transaction costs and easing financing constraints. At the same time, the results turn out that the digital transformation of enterprises has a significant role in promoting the innovation of large-scale non-state-owned enterprises and labor- and technology-intensive enterprises. In addition, the dividends of enterprises'' digital transformation cannot be separated from a sound institutional environment, it is found that the positive impact of digital transformation on enterprise innovation is more significant in regions with high levels of informatization, marketization, and intellectual property protection. The research provides new empirical evidence for accelerating the digital transformation of enterprises in the context of the digital economy to enhance innovation capabilities.