Abstract: Creating a world-class business environment is crucial for attracting foreign investment, stimulating innovation among foreign enterprises, and advancing reforms in China's foreign investment management system. This study investigates the impact of the business environment on the innovation input of foreign-funded listed enterprises located in China's Free Trade Zones. The results indicate that: (1) A favorable business environment significantly enhances innovation input among foreign enterprises, with stronger effects observed in the eastern and western regions. (2) Key dimensions of the business environment-namely, the market environment, government environment, legal and policy environment, and cultural environment-all positively influence innovation. Among these, the market and government environments have the most pronounced impact. Based on these findings, the paper offers policy recommendations focused on improving specific aspects of the business environment, providing valuable guidance for deepening reforms in China's foreign investment management system.