In the era of digital economy, digital technology innovation has become a core factor driving China's economic development. Based on the data of China's A-share listed companies and the list of the top five suppliers and distributors of listed companies from 2009 to 2022, the impact and mechanism of digital innovation in upstream and downstream enterprises of the industrial chain on digital innovation in midstream enterprises. By combining international patent classification with text analysis method, digital innovation patents was empirically investigated to characterize the level of digital innovation. The results show that the improvement of digital innovation levels in upstream and downstream enterprises significantly promotes digital innovation in midstream enterprises, indicating a significant positive spillover effect in the industrial chain. This effect is more significant in upstream enterprises, enterprises in the same industry, and enterprises with the same ownership type. Technological knowledge diffusion and market performance incentives are the two channels for the spillover effect. The micro-mechanisms of spillover effects among upstream, midstream, and downstream enterprises within industrial chains are revealed. Theoretical references and practical insights are provided for promoting digital innovation and key technological breakthroughs in enterprises, as well as facilitating the integration of the digital economy with real economy along industrial chains.