This study examines how business group affiliation moderates the performance (P) consequences of internationalization (I) by firms from advanced emerging economies that have implemented major promarket reforms. Our theoretical framework integrates institutional and network perspectives with internationalization research to investigate the effects of institutional change on the role of business groups in supporting the internationalization of their affiliates. Using a dataset of 143 publicly listed Korean manufacturing SMEs over a five-year period, our findings provide statistical evidence that business group affiliation has different moderating effects on the I-P relationship according to the degree of internationalization. Specifically, group-affiliated SMEs exhibit a U-shaped I-P relationship while non-affiliated, independent SMEs present an overall downward S-shaped relationship, where group-affiliated SMEs perform better at any level of internationalization. Besides, we also examine the moderating effect of industry characteristics and found that in the case of SMEs in technology-intensive industries, affiliation to a business group enhances firm performance at low and intermediate levels of internationalization. Overall, we conclude that business groups are able to provide benefits to their internationalizing affiliates in an improved institutional context.