Capital investment and internationalization

Degrees of firm internationalization vary across industries and over time, depending on a number of factors. In this paper, I hypothesize that firms mitigate the investment risk resulting from having large amounts of capital investment by expanding their business internationally. Using a large panel sample that covers non-financial firms listed in the US during the period 1990-2013, I find that capital investment negatively affects the internationalization level. The negative effect of capital investment on internationalization levels is evident for (1) large firms, (2) firms with large fixed assets, (3) firms with small and large capital investment, and (4) firms with non-positive sales growth rates. In addition, the relation between capital investment and the degree of internationalization is non-linear and varies over time. I also find that the effect is negative prior to the burst of the IT bubble in 2001, neutral during the burst of the IT bubble and the non-crisis period, and positive during and after the 2007 global financial crisis.