Diversification and Human Capital as Antecedents of Internationalization amongst Professional Service Firms: A Study of UK Based Engineering Consultants

This paper studies the antecedents of internationalization amongst professional service firms (PSFs). Using a unique panel of UK-based engineering consultancies over the 1994-2009 period, we show that more specialized PSFs are more likely to internationalize than firms with a broader scope of activities, and that domestic geographical diversification as well as diversification into more unrelated fields enhances the international competitiveness of PSFs. Specific human capital also fosters internationalization, and moreover, significantly intensifies the advantages of various forms of diversification. Business size, age, foreign ownership and management buy-outs also exert positive and significant effects. The findings contribute to the literature on services internationalization and provide novel insights for the management of firms’ geographical and industrial diversification.