In recent years, the environmental constraints faced by enterprises have become increasingly tight, and the importance of green development of enterprises has become increasingly prominent. Green innovation is an important way for enterprises to participate in environmental governance and enhance green competitiveness. However, in the existing literature on enterprise green innovation, few studies have paid attention to the differential impact of principal-agent problems on substantive green innovation and strategic green innovation in private enterprises. This paper uses data from the CSMAR, RESSET, China Research Data Service Platform (CNRDS), and the State Intellectual Property Office (SIPO), and uses private companies listed on A-shares from 2009 to 2022 as a sample. This paper finds that state-owned capital participation has a biased effect in promoting green innovation in private enterprises, that is, state-owned capital participation promotes substantive green innovation in private enterprises but has no significant impact on strategic green innovation. The mechanism test finds that this result is the net effect of the superposition of the “resource effect” and the “governance effect” of state-owned capital participation. Specifically, the shareholding of state-owned shareholders increases the policy subsidy funds obtained by private enterprises, thus easing the resource constraints of green innovation in private enterprises. More importantly, the shareholding of state-owned shareholders enables private enterprises to use policy funds more effectively, which is reflected in that when private enterprises get more policy subsidies, state-owned capital participation can further promote substantive green innovation in private enterprises while inhibiting the strategic green innovation in enterprises. In addition, the analysis of heterogeneity found that the participation of state-owned capital preferentially promoted substantive green innovation in private enterprises with low green development intention, weak external environmental regulations, and non-heavily polluting industries, while the impact on strategic green innovation of these enterprises was either inhibited or limited. Compared with the existing literature, most of the previous studies only discussed the green innovation behavior of enterprises from the perspective of resource-based theory. Based on the principal-agent problems faced by private enterprises in green innovation, this paper further supplements and improves the boundary conditions affecting green innovation behavior of private enterprises from the perspective of enterprise equity arrangement. The research results of this paper not only provide policy implications for how state-owned capital can promote the green and sustainable development of private enterprises, but also expand the previous research on the economic consequences of private enterprises participating in the reverse mixed ownership reform.