Strategies to avoid liability of foreignness when entering a new market

Abstract

PurposeThe purpose of this paper is to investigate the liability of foreignness (LOF) concept when entering a new market. Drawing on the past literature, the current research provides a summary of issues of the main LOF that companies face, as well as suggestions to help avoid such burdens. The research also attempts to provide a bibliographic analysis of the topic.Design/methodology/approachArticles were collected from All Database of ISI Web of Knowledge, using “all years,” “social science,” and “business economics” as search terms. Relevant papers on the LOF topic were retrieved and sorted to identify the main issues. Furthermore, a bibliographic analysis of the LOF concept was elaborated. HistCite software was used to create a table and a graph for the most relevant papers. A summary of issues on LOF strategies was created along with guidance for companies entering a new market.FindingsThe study sorts strategies to avoid LOF, including operational capabilities, entry modes, country of origin, legitimacy achievement, risk of politico-economic changes, and location selection. The study identified strategies for small- and medium-sized businesses (SMEs) entering emerging and transitional economies, as well as suggestions when entering sophisticated economies.Practical implicationsThe current data summary informs managers from diverse organizations who attempt to enter a new market with particular sociopolitical contexts.Originality/valueA summary of issues on LOF and suggestions for overcoming these problems to help companies enter new markets have not been available. The current study attempts to fill that void, providing suggestions to managers and business owners who have moved or expanded their businesses to a foreign country or contemplate an international move.