Improving the dynamic capacity of technological innovation is crucial for realizing the high-quality development of private enterprises. Using the difference-in-differences model, the paper tested the impact of state capital participation on the dynamic capacity of technological innovation in private enterprises. The results indicate that state-owned capital participation positively influences the level of differentiated innovation and the ability to transform technological innovation in private enterprises. This positive impact is particularly significant in large-scale, high-tech, and growth-oriented private enterprises. Further research suggests that state-owned capital participation can alleviate external financing constraints, thereby promoting the level of differentiated innovation. Additionally, it can improve the orientation towards social responsibility, enhancing the dynamic capability of technological innovation. However, excessive state capital holdings are detrimental to the dynamic capabilities of technological innovation. Furthermore, the level of differentiated innovation and the transformation capacity of technological innovation have a positive impact on the future performance of private enterprises.