The relationship between internationalization and performance is one of the most important and fundamental issue in the IB literature. However, in spite of the large amount of studies during past few decades, mixed findings have been reported. Most of studies neglected contextual factors and mainly focused on advanced nations. This study made an attempt to examine the relationship between internationalization and performance based in an emerging economy (China), which has provided a unique research setting and sheds new lights on this relationship. In addition, it also tested the moderating effects of firm-specific capabilities and institution factors on the relationship. The result, based on a longitudinal sample of manufacturing firms in China, reveals an S-shape relationship between internationalization and performance for Chines firms. Also, we found R&D intensity has a negative moderating effect at the initial stage of internationalization. Besides, governance structure also moderates the relationship such that SOEs are more likely to be less profitable through internationalization.