The impact of internationalisation on the performance of BRICS-listed firms

Naidoo, Vadanka

The impact of internationalisation on the performance of BRICS-listed firms

Thesis / Dissertation

2026

Publisher

University of Cape Town

Department

Department of Finance and Tax

Faculty

Faculty of Commerce

Abstract

The internationalisation of emerging market firms has gained attention amid growing debates about globalisation. Unlike firms from developed economies, many emerging market firms have expanded abroad more recently after having built unique strengths in innovation and resilience while navigating institutional voids and political uncertainty. While several studies investigate the link between the degree of internationalisation and firm performance, most focus on developed countries or single-country contexts, with limited cross-country evidence for emerging markets. Moreover, the findings remain mixed as to whether internationalisation enhances performance and whether this relationship is non-linear. The objectives of this study are to investigate the internationalisation-firm performance relationship and the role of firm size and industry as moderators in this relationship for BRICS-listed (Brazil, Russia, India, China and South Africa) firms, as these countries represent significant emerging markets. Panel data for non-financial listed firms for the period 2017 to 2023 is used. Internationalisation is measured using the ratio of the firm's foreign sales to total sales whilst firm performance is measured using Return on Equity (ROE), Return on Assets (ROA) and Tobin's Q. Leverage, firm size, firm age, asset use efficiency, firm industry and the direct exchange rate are used as control variables. A series of endogeneity tests are performed to determine the most appropriate panel model for each performance measure metric. Overall, the findings show no evidence of a consistent linear or non-linear relationship between the degree of internationalisation and firm performance for the BRICS-listed firms. However, when ROA is used as the performance measure, there is some evidence of a positive effect at higher levels of internationalisation although no clear U-shaped pattern emerges. When firm size is included as a moderating variable, the findings support that internationalisation and firm performance are positively related. Using the number of geographical segments in which the firm operates as an alternative measure of the degree of internationalisation, greater geographic spread is found to be negatively related to ROE but positively associated with ROA. Taken together, these results suggest that while increased internationalisation can bring benefits for BRICS-listed firms, they are often offset by the costs and challenges. The findings provide guidance for managers and investors by placing emphasis on the importance of capability development and strategic pacing in foreign expansion. The results also offer insights for policymakers seeking to support firms in overcoming early-stage internationalisation challenges.

Keywords

BRICS

internationalisation

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