There are two ways to improve a country’s technological innovation capability: one is the independent innovation based on local R&D investment, and the other is the secondary innovation through the introduction, absorption and digestion of foreign technology. Many empirical studies have proved that outward foreign direct investment can promote home country’s technological innovation capability. The related research has just emerged in China and there are a few of issues which require further exploration: first, some literatures took technological innovation capability as dependent variable of regression model and the foreign direct investments directly as explanatory variables which ignored that the foreign R&D capital stock is the key factor for technology spillover effect of outward foreign direct investment. Second, theoretical research has pointed out that the absorptive capacity of the home country is the important factor for technology spillover effect of outward foreign direct investment, while most of empirical research didn’t consider the role of technology absorption capacity. Third, a lot of researches in China devoted to the location choice of outward foreign direct investment, but few paid attention to the different effects of improving the technology innovation ability in different regions in China. Therefore, this paper attempts to extend the existing study in the above three aspects. Based on the criticle review of the relevant theoretical researches on technology spillover effect of outward foreign direct investment, this paper discusses how the outward foreign direct investment affects Chinese technological innovation capability, and presents a promotion mechanism of technological innovation capability through outward foreign direct investment. Multi-National Corporations mainly promote technological innovation ability of the home company by R&D elements absorption、R&D findings transfer and R&D personnel training. And we also analyze the impact of absorbing ability on the improvement of innovation capability through outward foreign direct investment. This paper uses China's inter-provincial panel data (from 2003 to 2010), and extends the L-P model by introducing the interaction term of absorption capacity and the obtained foreign R&D capital stock through OFDI. The results of the empirical test show: outward foreign direct investment can promote China's technological innovation capability. For China's eastern region, OFDI has positive impact on the reverse technology spillover, while for central regions, the effect is not significant, and OFDI may have negative impact on innovation capability of western region. Based on the above empirical results, we suggest that: firstly, we should increase technology-driven investment to developed country, since technology-driven investment is an important way to get leap forward in technology and improve the technological innovation capability. Secondly, in order to make full use of the foreign direct investment reverse technology spillover, we should improve our country’s absorptive capacity.