Abstract: External investment and cooperation in the digital economy are important engines driving the high-quality development of the digital economy. Based on the annual reports of the listed companies of Chinese digital enterprises from 2002 to 2020 and the China Innovation Patent Research Database, this study empirically tests the innovation effect and its internal mechanism of digital enterprise outward direct investment by employing anasymptotic difference-difference model. The research results indicate that, firstly, the innovation effect of digital enterprises’ outward foreign direct investment is significantly positive, and its promotion effect on high-quality innovation is more significant. Secondly, the outward foreign direct investment of the digital enterprises can drive the innovation of the digital enterprises by saving transaction costs, expanding market size, and leveraging digital upgrading mechanisms. Thirdly, the test results of enterprise ownership, enterprise size, and industry heterogeneity indicate that the innovation effect of the outward foreign direct investment by the small and medium-sized digital enterprises and the non-state-owned digital enterprises is more significant; the innovation effect of the outward foreign direct investment by the enterprises in the telecommunications, radio and television, satellite transmission services, and computer, communication and other electronic equipment manufacturing industries is significant. Therefore, efforts should be made to promote the external investment and cooperation in the digital economy, encourage enterprises to actively participate in the host country’s digital platforms, align with the host country’s digital standards and rules, effectively seize the opportunities in the global digital market, and reasonably arrange digital enterprises to“go global”, so as to enhance the innovation capabilities of digital enterprises and achieve high-quality development of the digital economy.

Key words: digital enterprises' outward foreign direct investment, enterprise innovation, digital economy, double difference method