• firm performance;
  • business group affiliation;
  • innovation

We use firm-level data provided by the fourth U.K. Community Innovation Survey (CIS4) to investigate the relationship between business group affiliation, innovation, internationalization, and firm performance. We carry out a semiparametric estimation procedure and find that: (1) firm performance is higher for those firms that join business groups rather than for stand-alone firms; (2) the introduction of innovation through organizational and/or managerial practices provides higher performance in business groups affiliated than in unaffiliated firms; (3) the joint adoption of innovations is more beneficial than the individual adoption; (4) the interplay between business group affiliation and innovation leads to better performance in those firms that face competition in international markets rather than in those whose product market is domestic only.