Liabilities of Foreignness Revisited: A Review of Contemporary Studies and Recommendations for Future Research

Abstract

Abstract The concept of liabilities of foreignness (LOFs) describes the additional costs that multinational enterprises have to face relative to their indigenous competitors when operating in foreign markets. To date, the special issue of the Journal of International Management (Vol. 8, No. 3) in 2002 contains the only overview of both the state of the literature on this concept and recommendations for further research. A decade later, we examine how the LOFs literature has evolved since this special issue and on that basis provide a critical evaluation of the concept. Specifically, we document the evolution of the field by analyzing drivers and outcomes of LOFs; we also examine how theoretical streams have been applied to the concept, including theories of international expansion, social network theory, institutional theory, and the resource-based view. Comparing the recent literature to what had been recommended as future research avenues in the special issue, we identify areas that either have not been addressed in the meantime (e.g., more theoretical pluralism in interdisciplinary research settings) or have as yet received little attention (e.g., the dynamic perspective of its development and the investigation of LOFs in the context of multinationals from emerging markets). More fundamentally, recent literature in international business also indicates that the concept of LOFs might have been superseded by concepts originating in institutional theory.