Capital investment, internationalization, and firm performance: Evidence from Southeast Asian countries

• I examine non-financial firms in five countries in the Southeast Asia region.
• Capital investment negatively affects the level of internationalization.
• Capital investment has a positive effect on foreign sales growth.
• The level of internationalization is not associated with return on assets.
• The level of internationalization is positively associated with stock returns.

This study asks whether firms that invest more have higher degrees of internationalization and whether firms with higher degrees of internationalization perform better than those with lower degrees of internationalization. Using a large panel sample that consists of non-financial firms in five countries in the Southeast Asia region during the period 1990–2014, I show that capital investment negatively affects the level of internationalization but has a positive effect on foreign sales growth. The negative effect of capital investment on internationalization levels is weaker for firms with higher degrees of internationalization. The level of internationalization is not associated with firm performance, measured as return on assets; however, there is some evidence for the positive relation between the level of internationalization and firm performance, measured as the stock return.