Abstract:     Financial frictions lead to a lack of technological innovation in private enterprises, which has become a prominent financial mechanism obstacle to advancing Chinese-style modernization and high-quality development. The technological advantage of digital finance provides the basis for an effective solution of the financial frictions. This paper demonstrated the theoretical relationship between the development of digital finance, financial frictions, and enterprise technological innovation based on the revised BGG model, and used the private enterprise data from the A-shares of the Shanghai and Shenzhen stock exchanges from 2011 to 2020 to test the effectiveness of digital finance on the impact of different types of financial frictions on the investment of private enterprises in their technological innovations. The study found that (1) digital finance has the effect of mitigating financial frictions to promote innovation investment of private technology enterprises, among which the effects of digital payment and digital credit are more significant; (2) the mechanism analysis showed that digital finance can effectively reduce the financial frictions of capital mismatch and financing cost constraints, but does not have a mitigating effect on the financial frictions related to financing availability; (3) digital finance can target correct the "field mismatch", "stage mismatch" and "regional mismatch" in innovation financing, and has a stronger promoting effect on the investment of private enterprises in their technology innovation in economically underdeveloped areas, small-scale, and well-established governance systems. This paper will help to clarify the theoretical mechanism of digital finance promoting the technological innovation in private enterprises, and provide reliable empirical evidence and decision-making supports for effectively resolving financial frictions and enhancing the technological innovation ability of private enterprises.

Key words: digital finance, financial friction, private enterprise, investment in technology innovation