Innovation is an important driver to enhance the competitiveness of enterprises and promote a country′s sustained high-quality economic growth. Although the rapid development of the Internet has narrowed the distance among economic agents, the role of geographical distance on innovation cannot be ignored. Geographical distance is a crucial factor for communications and interactions among members. With the development of economic geography, it has been widely applied to the field of financial accounting. Existing studies have primarily focused on two aspects: the influence of the geographical distance between the firms and other institutions; the geographic concentration between firms on the decisions of firms. However, little attention has been paid to whether the geographic concentration of other institutions, in addition to firms, has impacts on the decisions of economic agents. Additionally, extant research on the association between institutional investors and corporate innovation is limited to heterogeneous characteristics and cross-sectional linkages among firms, lacking research on the impact of the geographic concentration of institutional investors on corporate development. Moreover, these studies have focused more on developed country, failing to dialectically recognize the advantages and disadvantages of the geographic concentration of institutional investors. It is especially the case in the context of China as an emerging economy.In this study, we use Chinese evidence to examine how the geographic concentration of institutional investors influences corporate innovation. We intend to answer two questions. First, what is the impact of the geographic concentration of institutional investors on corporate innovation? Second, what are the theoretical boundaries? To answer these questions, it first examines how the CEO’s openness-trait affects the relationship between the geographic concentration of institutional investors and firm innovation. Secondly, since the degree of industry competition faced by a firm affects firm innovation behavior, its moderating role in the relationship between the geographic concentration of institutional investors and firm innovation is examined in terms of industry concentration. Based on the data of Chinese A-share listed companies from 2005 to 2020, this research uses the hierarchical regression method and Stata/SE 15.1 to test the relevant hypotheses. The data on the geographic concentration of institutional investors is obtained through Baidu map API using Python, and the data on corporate innovation is obtained from the China Research Data Service Platform (CNRDS), and all other data are obtained from the CSMAR database.The empirical findings of this research are as follows. Firstly, holding firm size and other factors constant, the combined effect of benefits and costs will lead to a significant inverted U-shaped relationship between the geographic concentration of institutional investors and firm innovation. Second, CEO openness and industry concentration, as moderating variables, weaken the negative effect of the geographic concentration by reducing the costs associated with increased the geographic concentration of institutional investors. As a result, it presents a flatter inverted U-shaped curve. When there is significant flattening, the U-shaped relationship, the shape flip phenomenon, eventually occurs. Further, a possible reason for the shape flip phenomenon is identified. As CEO openness and industry concentration increases further, it slows the cost growth associated with the geographic concentration of institutional investors significantly, which may change the concave nature of the cost curve. Finally, robustness of the previous results is verified in several ways, including replacing the dependent variable and considering the annual trend of the industry. Upon checking, the findings still hold.Our findings provide theoretical implications for the existing literature in three ways. Firstly, this research explores the mechanism of the inverted-U effect of the geographic concentration of institutional investors on firm innovation in the Chinese context. It may fill the research gap in the negative effect of the geographic concentration of institutional investors. Further, it also extends research on the geographic concentration of institutional investors. Secondly, we focus on the mechanism and situational conditions of the influence of the geographic concentration on firm innovation due to geographical distance among the internal members of economic agents, that is, institutional investors. In this sense, it expands the research to the relationship between geographical distance and firm innovation. Thirdly, while previous studies have paid attention to characteristics such as heterogeneity or horizontal association among firms without considering the geographical characteristics, our study examines the relationship between the geographic concentration of institutional investors and firm innovation. Hence, this study enriches the research on the governance mechanism of institutional investors and the relationship between the behavioral characteristics of institutional investors and corporate innovation.