As China continues to expand its high-level openness to the global economy, import competition has become a significant factor influencing corporate innovation. Digital transformation, as a key manifestation of technological innovation within enterprises, also serves as a moderating factor in this relationship. This study examines the impact of import competition on corporate innovation and the moderating role of digital transformation using a dataset of Chinese listed companies from 2007 to 2020.The results reveal an inverted U-shaped nonlinear relationship between import competition and corporate innovation capability. Human capital investment is identified as a crucial mechanism through which import competition affects corporate innovation. Digital transformation exerts a positive moderating influence on the import competition-innovation relationship. The primary mechanisms are as follows: digitalized enterprises can alleviate financing constraints, thereby weakening the competitive crowding-out effect, enhance the efficiency of corporate R&D, thus strengthening the competitive evasion effect, and upgrade the intensity of R&D investment, further amplifying the technological spillover effect. Regarding product types, There is a significant positive linear relationship between intermediate goods imports and enterprise innovation, while there is a significant inverted U-shaped relationship between final goods imports and enterprise innovation. In terms of innovation type, the effect is more significant for breakthrough innovation compared to incremental innovation. Regarding the mode of digital transformation, the digitization of smart manufacturing and modern information systems plays a more substantial moderating role. This study confirms the vital role of domestic digital transformation in shaping corporate innovation in the context of import competition. The result offers new insights for China to continue to advance its digital transformation under high-level openness. It also provides valuable guidance for promoting high-quality economic development.