Two dimensions of internationalization. An empirical analysis of the internationalization of firms

In order to analyze the impact of internationalization on national institut ions, methods of measuring the degree of internationalization are required. The article presents a method for measuring the degree of internationaliza tion of firms. We assume that the internationalization of firms has several dimensions which cannot be combined into one index, and therefore, have to be distinguished. The first dimension refers to the production activities of firms abroad; the second is measured by the proximity of the firm to int ernational capital. Using a group of the 100 largest German companies both dimensions are empirically tested. Factor analysis supports the assumption that both dimensions, the product-oriented and the financial dimension, do not co-vary and can be separated. Using the measurements we can rank firms into higher and lower degrees of internationalization.