Moderator Effect of Innovation on the Relationship between Internationalization and Performance in Brazilian and European Companies

Objective: To analyzes the moderating effect of innovation on the relationship between internationalization and financial performance. Method: The sample gathers 1,840 companies listed on Brasil, Bolsa, Balcao (B3) and NYSE Euronext  during the period of 2014-2018. Tests for difference of means were performed and linear regression models with panel data via systemic generalized moments method (GMM-Sys) were estimated. Results: Estimates indicate that the degree of internationalization alone does not assure high financial performance in Brazilian companies, while in European companies it influences return on assets (ROA) negatively. Moreover, in both contexts, the individual moderating effect of the two variables of innovation, exploration (R&D) and exploitation (Capex), could not be identified. However, a positive and significant effect of ambidextrous innovation activities in the relationship between internationalization and financial performance was verified. Evidence of the effect of internationalization on financial performance in both Brazilian and European companies is confirmed when enhanced by the simultaneous engagement of innovation activities. Contributions: This study contributes to a recent investigative line, which verifies the effect of intervening variables in the internationalization-performance relationship. It contributes to the analysis of this relationship in companies from emerging markets, a much and still needed research focus as a way of gaining a better understanding of business opportunities in adverse institutional conditions and how to seize them.