Abstract: An optimized business environment is a crucial driver of business model innovation. Drawing on institutional theory and dynamic capability theory, this study introduces four dimensions of the business environment—resource element supply, service atmosphere construction, achievement transformation support, and legal system guarantee—as key factors influencing business model innovation. It further examines the mediating roles of three knowledge-based dynamic capabilities, namely knowledge recognition, knowledge acquisition, and knowledge absorption. Based on questionnaire data collected from 575 high and new tech enterprises, the empirical results show that all four dimensions of the business environment significantly promote business model innovation. Further analysis indicates that the business environment drives business model innovation primarily by enhancing firms' knowledge acquisition and knowledge absorption capabilities, whereas the mediating effect of knowledge recognition capability is not significant. Based on these findings, this study suggests that governments should prioritize improving service-oriented governance, strengthening support for the commercialization of innovation, and enhancing legal and institutional safeguards. Enterprises, meanwhile, should focus on strengthening knowledge acquisition and absorption capabilities and promoting cross-regional collaboration to overcome institutional constraints.