An institutional logics approach to liability of foreignness: The case of mining MNEs in Sub-Saharan Africa

Abstract

Prior research on firms’ liability of foreignness (LOF) has emphasized the role of isomorphic behavior in overcoming LOF. However, the literature has not adequately considered how firms can overcome LOF under conditions of institutional complexity, when fundamental differences in firms’ home and host country values, beliefs, and rules may make isomorphic behaviors impossible or undesirable. In this article, we use the emerging research on institutional logics and institutional entrepreneurship to address this important issue by examining case studies of eight foreign mining MNEs experiencing LOF in Sub-Saharan Africa. Based upon our qualitative analysis, we find that MNEs can overcome LOF by co-creating new institutional logics rather than conforming to existing ones. Yet our data show that this is a difficult process, one that may not be capable of being done unilaterally by the MNE. Instead, we find that local employees embedded in both sets of competing institutional logics acted as key intermediaries who facilitated institutional entrepreneurship. Moreover, we found that firms’ implementation strategy matters as well: in some cases, institutional entrepreneurship mitigated LOF; in others, friction returned to varying degrees.