Innovation and internationalization activities are considered two key sources of firms' competitiveness, growth and profitability. This study evaluates the relationship between both strategies, and with business performance. The analysis is based on survey data from a sample of Spanish manufacturing firms from different industries and stratified according to their internationalization involvement, divided for the first time in this field in different stages according to their level of exports and FDI. We argue that companies in more advanced internationalization stages will be more innovative. The results show a positive and significant increase in the level of product innovation as companies advance through the internationalization stages, with exporters as a whole exhibiting a higher level of both product and process innovation. Furthermore, internationalization shows a stronger contemporaneous effect on performance, while the direct impact of innovation is not significant. Conclusions are offered regarding both companies' management and public policy.