High-quality innovation can effectively promote economic development and transformation. This paper takes A-share listed companies from 2010 to 2020 as samples to explore the relationship between institutional investor shareholding and enterprise innovation quality. It is found that the influence of institutional investor shareholding on enterprise innovation quality has an interval effect. When the shareholding amount of institutional investors exceeds a certain threshold, it shows an inhibition effect on enterprise innovation quality, namely, the two have an inverted U-shaped nonlinear relationship. Pressure-resistant institutional investors are an important force causing nonlinear relationship. The intensity of market competition and absorptive capacity of firms help to alleviate the restraining effect of excessive institutional ownership on the improvement of innovation quality.