Abstract
Multinational organizations increasingly face strong resistance to their market entry by some local audiences, reflecting growing ideological divisions and populism in societies. We turned to the organizational stigma literature for the conceptual tools and vocabulary to uncover why multinationals can simultaneously be praised by some audiences and tainted by others. Drawing on a longitudinal explanatory case study of an unsuccessful market entry, we develop a process model of organizational stigmatization in a foreign market entry. Our model explains how and why some local audiences may taint the core attributes of an entry-seeking organization and its market entry process, while others may embrace the foreign entrant. We also introduce the notion of cross-border stigma translation where negative audience evaluations are amplified across geographic contexts. A focus on competing local audiences is important for understanding the generative mechanisms of the liability of foreignness and liability of origin and how to manage them. Our study grounds a conversation on the processes and mechanisms of organizational stigmatization that may cause permanent liabilities to foreign organizations.
Highlights
As the opening quotation suggests, the reactions of local audiences to an entry-seeking multinational may be ideologically driven
Drawing on a longitudinal explanatory case study of an unsuccessful market entry, we develop a process model of organizational stigmatization in a foreign market entry
In explaining why the Guggenheim failed in its market entry we established that local audiences engaged in processes of organizational stigmatization in order to construct liabilities that tainted the museum
Summary
As the opening quotation suggests, the reactions of local audiences to an entry-seeking multinational may be ideologically driven. Stigma is a moral categorization of an organization that provokes a strong negative, emotional reaction among audiences (Ashforth, 2019; Goffman, 1963; Hudson, 2008); this distinguishes it from related concepts such as (il)legitimacy, LOF, or LOR. We uncover audience-specific evaluations of a foreign market entrant by integrating insights from organizational stigma literature into LOF and LOR research. Research on organizational stigma allows us to augment current understanding of how local audiences can make strategic use of stereotypes, negative labeling, and emotions to stigmatize entry-seeking firms. Foreign market entry provides a fertile research setting for studying stigmatization because it reveals authentic evaluations of the foreign entrant by local audiences (Sethi & Judge, 2009; Zaheer & Mosakowski, 1997). Their model does not account for how local audiences construct liabilities to block foreign entrants – the focus of our empirical study
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