Abstract: Internationalization is an important open innovation strategy through which firms in emerging countries can increase innovation potential. However, extant theory can not properly explain the mechanism of internationalization on innovation performance of firms in emerging countries. Based on the dynamic capabilities view, this study aims to examine how export and outward FDI can be beneficial to firm’s innovation in an emerging country. Using survey data from a sample of manufacturing firms in China, we demonstrate that export and outward FDI are both important in the innovation effort, their effect on innovation performance are channeled through each firm’s opportunity-recognizing capability and opportunity-capitalizing capability. Theoretical and managerial implications are discussed.