Trapped by Over-Embeddedness: The Effects of Regional Social Capital on Internationalization

Drawing on social capital theory and international business literature, we argue that firms’ home region social capital increases the degree of firms’ internationalization for both goods and knowledge. Beyond a certain level of social capital, however, firms become over-embedded in their home region social relationships so that the degree of internationalization decreases. We also conjecture that firms’ investment in research and development moderates the relationship between home region social capital and the degree of internationalization for goods and knowledge in a positive fashion. Combining data on social capital at the level of 21 regions with a large-scale data set on internationalization activities by a representative sample of around 2000 Italian manufacturing firms, we find—after controlling for a large set of firm and regional characteristics— overall support for our theoretical arguments.