Internet　business　adoption　is　an　essential　determinant　of　regional　innovation　which　has　received　little　attention　in　the　literature.　This　paper　emphasizes　the　role　and　threshold　effect　of　Internet　business　adoption　in　increasing　regional　innovation　outputs.　We　construct　a　threshold　spatial　autoregressive　model　to　illustrate　the　nonlinear　positive　impact　of　Internet　business　adoption　on　innovation,　simultaneously　estimating　interregional　knowledge　spillovers.　To　test　threshold　effect　and　interregional　knowledge　spillover,　we　use　province-level　panel　data　set　in　China　and　calculate　Moran＇s　I　and　LR-like　statistics　to　confirm　the　nonlinearity　and　spatial　dependence.　Within　the　empirical　model,　we　find　a　positive　relationship　between　the　number　of　websites　owned　by　local　firms　and　the　number　of　patents　filed　in　that　specific　region.　Our　analysis　suggests　that　Internet　business　adoption　has　a　greater　marginal　benefit　on　the　innovation　of　isolate　regions.　The　results　also　indicate　that　ignoring　interregional　knowledge　spillover　may　cause　mistakes　in　the　model　on　regional　innovation　systems.　Policy　implications　for　these　results　suggest　that　the　government　should　not　only　pay　attention　to　Internet　development　of　the　whole　country　but　also　encourage　the　reduction　of　digital　divisions　among　regions