This paper investigates whether firms’ innovation activities have an effect on firms’ capital structure. We examine an evidence of the impact of capital structure from three sources of technology innovation: firm’s own patent activities, technological diversification and industry patents level. We find that first, firm`s own patent level affects negatively with firm`s capital structure. Second, among the more patenting firm,, the more diversified technologies the firm has, the more leverage the firm uses because of expansion of debt capacity. Last, industry patent affects negatively with capital structure of firms in an industry. The paper uses patent applications as an innovation measure and tests the theory with panel data of 1998-2002.