Though the inverse U-shaped relationship between external knowledge heterogeneity(KH) and firm innovation performance has been tested by many scholars recently，few quantitative studies on the endogenous mechanism and reason of the inverse U-shaped relationship between the two have been done. Using a survey data of 261 firms from innovation-intensive industries in east China, this study provides evidence of the inverse U-shaped relationship between the two by introducing two variables of knowledge reconfiguration and absorptive capacity. The empirical research results show external KH exists both the value of knowledge reconfiguration and the trouble of absorbing and transferring. In addition, we find external KH influences innovation performance through two opposite mediating mechanisms which are named knowledge reconfiguration and absorptive capacity. This study deepens our understanding regarding to the intrinsic mechanisms between external KH and innovation performance, and further develops the study of existing literature in this field.