Based on the data of China industrial Enterprise database, this paper investigates the micro mechanism and deep causes of capital misallocation affecting new product innovation. It is found that capital mismatch will reduce the tendency of R&D and innovation, and reduce the proportion of output value of new products in the total industrial output value, which is not conducive to the innovation of new products. With the increase of capital misallocation, the incentive of R&D investment and human capital level of enterprises will be reduced, and then the improvement of new product innovation level of enterprises will be inhibited. R&D investment mechanism and human capital investment mechanism are the important mechanisms of capital misallocation affecting new product innovation of enterprises. In addition, capital misallocation has a dynamic impact on fi rm innovation, and capital misallocation in the past will have a lasting impact on fi rm's current new product innovation output. Capital mismatching has a greater negative impact on new product innovation of governmentsubsidized enterprises, export enterprises and large-scale enterprises. Compared with non-state-owned enterprises, capital mismatching inhibits new product innovation of state-owned enterprises more strongly. In terms of regional differences, capital mismatching has the greatest impact on new product innovation in eastern region, followed by western region and central region. The conclusion shows that the national policy is inclined to the reform of the fi nancial system and R&D subsidies, which is of great signifi cance to guide enterprises to increase R&D investment and human capital investment, and then promote enterprise innovation output.