Liability Of Foreignness Research Articles

Cognitive sources of liability of foreignness in crowdsourcing creative work

Cognitive sources of liability of foreignness in crowdsourcing creative work

Foreign and domestic multinationals’ linkages in advanced, small open economies: do foreignness, regional origin and technological capability matter?

Purpose International business theory suggests that multinational enterprises (MNEs) seek to internalise resources embedded in local firms to complement their own through inter-organisational relationships, yet little is known about whether and how these business linkages differ between foreign (F)MNEs and domestic (D)MNEs. This paper aims to explore the linkage differential between DMNEs and FMNEs operating in the same single-country contexts and to examine whether foreignness, regional origin and technological capability make a difference. Design/methodology/approach This study is based on a unique firm-level data set of 292 MNEs located in five advanced, small open economies (SMOPECs). This study analyses the benefit received – in the form of technical and organisational resources and knowledge – by DMNEs and FMNEs via backward, forward and collaborative linkages with local business partners. Findings Our research finds FMNEs benefit less from linkages than DMNEs; and FMNEs originating from outside the region especially so. However, the results also show technological capability mitigates this difference and is thus a game changer for FMNEs from outside the region. Originality/value This paper differentiates between FMNEs and DMNEs in their propensity to benefit from resources received from different local partners and explores the influence of regional origin and technological capability. Despite the advanced and internationally oriented nature of SMOPECs, DMNEs still gain more benefit, suggesting either liabilities of foreignness and outsidership persist, or FMNEs do not desire, need or nurture local linkages.

Transforming the liability of outsidership into assets of outsidership: a comparative study of Japanese automotive subsidiaries in Russia

ABSTRACTThis study investigates the mechanisms that transform the liability of outsidership into assets of outsidership. Debates on transforming the liability of foreignness into assets of foreignness have been emerging, but transforming the liability of outsidership into assets of outsidership remains unclear. Drawing on organizational learning perspectives, we provide a comparative study of Japanese automotive subsidiaries in Russia. We suggest that advanced economy multinational enterprises in emerging markets benefit from local networks with a local partner but not from non-experience-based firm-specific advantages. Our study contributes to current debates in the literature by presenting the novel concept of ‘assets of outsidership’ and discussing the mechanisms of this transformation.

Within-Firm Variation in the Liability of Foreignness: A Demand-Based Perspective

The literature on the liability of foreignness focuses on explaining why foreign firms operating in a given country underperform relative to their domestic rivals. We provide a complementary perspective that allows for within-firm variation in the liability of foreignness, at the level of a firm's products. Specifically, we explore how consumers’ willingness-to-pay for foreign products is affected by a firm's sourcing strategy for product inputs and by heterogeneity in demand characteristics across the markets where the product is sold. We hypothesize that sourcing inputs from a regional product developer as well as cultural diversity in regional consumer markets will have a stronger positive impact on the regional sales performance of products sold by foreign firms than on those by domestic firms. Our hypotheses are supported in a product-level analysis of 2,144 console video games sold in the 11 subnational regions of the United Kingdom over the period 2005–2008. Our findings suggest that firm-level explanations of the liability of foreignness need to be supplemented by a product-level perspective that considers heterogeneity in both supply- and demand-side factors as important determinants of consumers’ willingness-to-pay for foreign products.

The Effects of Timing and Order of Government Support Mechanisms for SME Exports

When small and medium-sized enterprises (SMEs) enter export markets, they face liabilities of smallness and foreignness. Their chances of success increase if they receive some support. Thus, many governments provide some export support for SMEs having realized that success in exports helps firm success and creates positive spillovers. We test the efficacy of three such support mechanisms: support for strategic export planning, support for trade fair participation and participation in ministerial visits and compare their relative results in various “time dimensions” (Jones & Coviello, J Int Bus Stud 36(3):284–303, 2005). Unlike past studies, we go beyond testing the effect of one support mechanism and compare the effect of the above different support mechanisms. We also show the importance of considering different dimensions of time – chronological “clock” time, “stopwatch” reference time, time sequence, and effect length time. We found evidence for the benefit of receiving multiple support mechanisms and we explored the sequence of receiving multiple support mechanisms. More specifically, our results suggest that exports are best facilitated by first receiving support to attend a trade fair, then developing an export plan; and then participating a ministerial visit abroad. Also, our study suggests that effect length is an important, previously ignored, dimension of time to consider. Empirically, hypotheses are tested on a longitudinal data set of Estonian SMEs receiving different types of government export support during 2009–2017. The data set was constructed from registry data covering the entire population of Estonian firms.

The impact of industry 4.0 on the 2017 version of the Uppsala model

The emergence of Industry 4.0 offers firms internationalization opportunities employing digital platforms and emerging technologies. Relying upon the Uppsala model as applied in light of a firm case study, we contribute to the validity of the Uppsala model 2017. We respond to the counterpoint by Coviello, Kano, and Liesch (2017) to the Uppsala 2017 model, answering the question, What is the impact of Industry 4.0 on the validity of the 2017 version of the Uppsala model? This study builds on a qualitative research methodology through a single case study of Delivery Hero, a global service provider firm. We adopt an extensive longitudinal approach to understand a startup firm’s digital business concept and business evolution, including its internationalization paths. We conclude that the mechanisms of the Uppsala model are valid, but their characteristics have changed by digital and globalized value-adding processes. The dynamic capabilities possessed by the founding entrepreneur turn out to constitute a critical micro foundation for the firm’s international business success. Our findings explain these change mechanisms, illustrating the stepwise progression process led by entrepreneurial decision-making. Industry 4.0 technologies have changed the very manner by which firms arrange their value-adding activities with their business stakeholders in course of the firm’s internationalization. By relying on reasonable business targets, algorithms, and data management systems, real-time market monitoring enables international startup firms to learn and adopt local identities faster, thereby efficiently alleviating liabilities of foreignness.

Where business networks and institutions meet: Internationalization decision-making under uncertainty

Both business networks and institutional forces are relevant to firm internationalization but they have seldom been studied together. We investigate under what circumstances firms are more likely to adopt non-predictive strategy in light of the influence of the business networks, the institutional forces, and the home market background affecting their internationalization. Based on survey data from 758 small and medium-sized enterprises (SMEs) from Brazil, China, Poland, Italy, and Sweden, our results support the effects of formal institutional distance and cultural differences on the use of non-predictive strategies by SMEs in internationalization decisions, as well as the contingency effects of business network stability and of having an emerging market background. We integrate research on the liability of foreignness and the liability of outsidership and find that business network stability is critical. It does not moderate the relation between cultural difference and NPS adoption but attenuates the negative relation between institutional distance and NPS adoption, indicating that the liabilities of foreignness and outsidership play different roles in internationalization.

The impact of hiring local managers on foreign venture capital performance: evidence from China

PurposeThis study examines whether recruitment of local managers helps foreign venture capital (VC) firms mitigate the liability of foreignness measured by cultural differences and improves their performance in relationship-based emerging markets such as China.Design/methodology/approachFrom a data set comprising 1,939 Chinese portfolio companies with first-round investments by 282 foreign lead VC firms during 2000–2015, the study tracks the outcome of each investment until the end of 2018 and collects the background information of partners of lead VC firms. A survival analysis using the Cox hazard model is conducted.FindingsCultural differences of the foreign VC's home country, when compared to China, positively influence the success of VC firms. Recruitment of local managers reinforces this positive influence. The influence of local manager recruitment is more pronounced for VC firms with politically connected local managers, during politically uncertain periods, in industries supported by the government, in provinces with high government intervention and in VC firms with decentralized decision rights given to local managers.Originality/valueThis research complements the international business literature on the advantages of hiring local managers and identifies the channels through which local managers help foreign VC firms obtain relationship-based resources. The findings also have practical implications for those foreign investors who intend to enter into relationship-based emerging markets.

Multinational enterprises’ internationalization and adoption of sustainable development goals

PurposeUsing a sample of 1,517 multinational enterprises (MNEs) from 25 countries, this study aims to examine whether firm’s level of internationalization has a deterministic role for their engagement with sustainable development goals (SDGs). Additionally, this study aims to investigate the country- and industry-specific moderation effects on the relationship.Design/methodology/approachThis study employs negative binomial regression model along with the fixed effects for industry and time in the empirical estimation.FindingsThis study shows that MNEs’ internationalization is associated with their higher engagement in SDGs. This is owing to the pressures MNEs face from diverse stakeholders coupled with the need to build local legitimacy to overcome the liability of foreignness. The country-level results of this study suggest that this positive relation is stronger in countries with weak legal environment, countries with weak investor protection and in countries with higher SDG index scores. However, the industry-level results of this study indicate that the positive relation between MNEs internationalization and their SDG engagement are weaker in industries facing more competition and industries exposed to negative externalities. The results survive to controls for factors specific to firm and industry.Originality/valueThis study is one of the early studies which empirically examine the role of MNE internationalization and SDG engagement. Also, the findings of this study improve the understanding on country-specific and industry-specific challenges in implementing SDGs.

The foreignness effect on internationalisation depth: the perspective of multicomplexity and the duality of foreignness

PurposeThe literature on foreignness has, to date, stressed the liability of foreignness (LOF) and the advantage of foreignness (AOF). Drawing on industrial organisation theory, institutional theory, the resource-based view of the firm and the literature on networking, the authors’ research develops an integrated framework to explore the impact of foreignness on internationalisation depth from the perspective of the duality of foreignness (LOF versus AOF) within multiple dimensions. These dimensions are isomorphism, home country of origin, institutional distance and dual embeddedness of multinational enterprises (MNEs).Design/methodology/approachIn this study, the authors empirically test hypotheses arising from this new theoretical framework by examining the characteristics of a sample of 324 Chinese MNEs (CMNEs) that were operating in 63 countries from 1999 to 2018. Employing regression analysis on a panel of 9,410 observations, the results show that foreignness does exhibit multilevel complexity and duality.FindingsThe authors’ empirical results show that isomorphism pressures, country of origin and institutional distance have a negative effect on internationalisation depth (as an outcome of LOF) but that dual embeddedness, on the part of MNEs, exerts a positive impact on internationalisation depth (as an outcome of AOF). The implications for research on multilevel complexity and the duality of foreignness are discussed, and managerial implications are outlined.Research limitations/implicationsThe implications of the authors’ findings for MNEs should not be generalised to developed countries without examining the characteristics of both China as an emerging country and its MNEs. The second limit is regarding ownership; this framework has limitations due to choosing China and its OFDIs for testing internationalisation depth. Finally, for subsequent research, examining the dynamics of foreignness completes the nature of multicomplexity, defined by external and internal factors of foreignness changing over time and space.Practical implicationsCMNE managers are advised to actively scrutinise their behaviours in the local country to overcome the differences in routines, values and practices inherent in local institutions (Chen et al., 2019). The results imply that CMNEs should be careful not to overuse their home country image when penetrating a new market. Thus, a strategy to reduce a home government's hegemonic or otherwise negative image may be wise when operating abroad. Finally, the authors’ model suggests that CMNEs equipped with great RCN CIPs for identifying, scanning and interpreting local institutions can enhance internationalisation depth.Originality/valueThe authors’ research contributes to research on foreignness by emphasising foreignness as a construct of multilevel complexity. The authors argue that foreignness arises due to varying factors at the host, home, host-home levels and at the level of the organisational entity. The authors’ definition of foreignness and empirical results supports the notion that isomorphism pressures (host country-level factors), country-of-origin of home country (home country-level factors) and institutional distance (host-home country-level factors) are inextricably negatively linked with internationalisation depth (as effects of LOF). By contrast, the dual embeddedness of MNEs (the factor of organisational level) represents a positive relationship with internationalisation depth (as effects of AOF).

“Resources at Hand, Head, and Heart”: ‘Heightened Habitus’ as an Endogenous Resource in Immigrant Entrepreneurial Bricolage

Abstract Bricolage is commonly recognized as a practice of non-traditional resource mobilization by immigrant entrepreneurs within their country of residence. When the host country is in an adversarial social and institutional context characterized by the liability of foreignness, we posit that accessing “resources at hand” in the external environment is hampered by anti-immigrant sentiments, both socially and institutionally. Through a rigorous analysis of eight cases of immigrant entrepreneurs and their South African-based enterprises, we apply Bourdieu’s theory of practice to examine the practice of bricolage at a more nuanced level. Our findings suggest that the localized prejudice against immigrants ‘otherizes’ their foreignness, and in turn, heightens the entrepreneurs’ awareness of their habitus. We argue that the immigrants’ ‘heightened habitus’ represents an internalization of both cognitive (i.e. resources at head) and adaptive (i.e. resources at heart) dispositions informed by the home country, and which serve as crucial endogenous resources by which to reimagine and reconstruct external resources accessed via local social capital. We present the novel theoretical contribution of immigrant entrepreneurial bricolage as the utilization of both endogenous resources at head and heart, which are activated by – and intended to overcome – their liability of foreignness. Our contribution also aims to reconstruct the frequently referenced exogenous resources at hand.

How Different Drivers of Liability of Foreignness Affect Emnes Asymmetrically at the Pre-M&A Stage: Static and Dynamic Views

This study investigates how the drivers of liability of foreignness (LOF) influence the likelihood of emerging multi-national companies completing overseas acquisition deals and explores contingencies that moderate the adverse effects of LOF from both static and dynamic perspectives. We test our hypotheses and find that (1) statically, the formal institutions of laws and regulations per se as well as culture distance are sources of LOF, rather the distance between the laws and regulations of home and host countries. (2) Organization-inherent characteristics, like an industry that may trigger legitimacy concerns, have moderating effects on LOF, while state-ownership is not proved to be a significant moderating factor. (3) Dynamically, different drivers of LOF exert asymmetric effects on firms with prior international experience: cultural distance ceases to exert a significantly negative influence on the completion of acquisitions, but the negative effect stemming from formal institutions is reinforced.

International licensing by emerging market SMEs in the audiovisual industry

The central issue that guided the study was that of understanding how emerging market SMEs in the audiovisual industry overcome their liabilities of smallness, newness, outsidership, foreignness and emergingness when entering foreign markets through licensing. Using an abductive approach to the case method of investigation, the study analyzes three cases of animation studios from an emerging market, Brazil. The results show that the firms are quite different in the way they approach the international market through licensing. Each firm follows a trajectory that is strongly connected to its time of inception and its technological options. They use different approaches to overcome their liabilities, and thus deal with issues related to uncertainty, risk, commitment, and control. The study contributes in several ways to the understanding of how emerging market SMEs overcome their liabilities and enter foreign markets via licensing, including: establishing strategic partnerships, taking advantage of technology disruptions and industry turmoil early on, partnering with new players that are still building their networks, using home government incentives, and using the advantages of emergingness to enter alternative markets.

The Role of Institutional Linkages and Regional Institutions in the Location Choice of Outward Foreign Direct Investment: Empirical Evidence from Chinese Firms

Differently from the prior studies that look at the determinants of Outward foreign direct investment (OFDI) location choice, based on the institution theory and employing a comprehensive and unique micro-level dataset of Chinese firms, this study is the first to integrate institutional linkages (Confucius Institute) and regional institutions into one framework and looks at the role of the location choices of Chinese OFDI. The results show that Chinese firms prefer to invest in countries with the presence and higher number of Confucius Institutes including Confucius classrooms. Moreover, the institutional linkage of Confucius Institutes can alleviate the possible negative effects caused by the distance between China and the host country, which suggests Confucius Institutes help Chinese firms against liabilities of foreignness and risks and costs of operation in more distant host countries. We also find that the availability and quality of China’s regional institutions have a strong impact on local firms’ willingness and capability of participating.

Revisiting the concepts of liability of foreignness and liability of outsidership from foreign subsidiary management perspective

The concepts of liability of foreignness and liability of outsidership have been central in international business research. The Uppsala model explains that firms often face obstacles and opportunities in management practices in a host market when internationalizing abroad. International business scholars discussed these concepts redundantly but vaguely in the literature. Only a few literature sources defined and utilized the concepts clearly over the last decade, however, it has not been demonstrated how the key constructs help to explain firms’ foreign subsidiary management. Therefore, the study reconsiders the concepts and identifies a proper utilization of the concepts in the texts drawing on an intensive systematic literature review in the leading international business and strategy journals from 2011 to 2021. The study also analyzes the articles in which the authors find ambiguous and overlapping use of the concepts by clarifying key constructs as identifiers. The study integrates defensive and offensive options for overcoming liability of foreignness and liability of outsidership into our conceptual model of operational structures from the foreign subsidiary management perspectives. The study contributes by providing a novel intensive literature review of the concepts over the last decade; by clarifying the key identifiers to distinguish the concepts in the leading international business and strategy journals; by proposing newly integrated conceptual models of defensive and offensive options from foreign subsidiary management perspectives with the focus on intra-organizational structures for operational aspects.

Are Networks a Gateway to European Funding? Considerations from a Systematic Literature Review

Internationalization is generally an intense and dynamic phenomenon that requires huge resources to be triggered and this is all the more evident for International New Ventures (INVs) because of the so-called liability of newness and liability of foreignness. In fact, previous studies show that INVs, as they appear to have a limited availability of resources such as human and financial capital, are more disadvantaged in the internationalization process. A systematic literature review of twenty-five articles, classified into four categories, was carried out to reveal the main mechanism by which INVs try to deal with the lack of resources through relational networks. This study seeks on the one hand to contribute to the literature on network theory in internationalization, focusing on one of the possible categorizations of networks—social and business networks—by interpreting and investigating the two-phase internationalization process (exploration and exploitation), from the point of view of the International New Ventures entrepreneurs; on the other hand, it allows to make the preliminary considerations of a broader project aimed at understanding if and how networks can be used in the internationalization process of INVs to access European funding.

Liability of foreignness and liability of outsidership: understanding blockchain through Uppsala lens

Liability of foreignness and liability of outsidership: understanding blockchain through Uppsala lens

Overcoming the liability of foreignness through international business incubators: an empirical analysis of the Chinese environment

Overcoming the liability of foreignness through international business incubators: an empirical analysis of the Chinese environment

Overcoming the liability of foreignness through international business incubators: an empirical analysis of the Chinese environment

Overcoming the liability of foreignness through international business incubators: an empirical analysis of the Chinese environment

The nasty face of the liability of foreignness: MNCs and rent extraction

PurposeThis study aims to clarify the factors that act as a buffer to rent extraction from multi-national corporations (MNCs) in exchange relationships with the host country’s political actors.Design/methodology/approachThis study proposes a conceptual model of the factors that determine rent extraction by host country political actors from MNCs. The model identifies the sources of power the MNC can use to alleviate the power imbalance relative to the political actor to decrease rent extraction. Additionally, it identifies the factors that constrain the power-advantaged political actor, thus moderating the relationship between power imbalance and rent extraction.FindingsThis conceptual paper’s propositions remain for future empirical validation.Originality/valueThis study integrates insights from the international business literature and resource dependence theory (RDT) to identify the determinants of firm-specific rent extraction risk for MNCs. First, the model sheds light on the heterogeneity among MNCs in their susceptibility to rent extraction and their ability to manage their liability of foreignness in the host country. Second, by integrating the horizontal and vertical distribution of power in the political environment to analyze the power-dependence relationship between the MNC and host country political actors, the framework addresses a shortcoming of RDT and accounts for the dynamics of the external environment for MNCs managing their dependencies. This study also provides a basis for discussing the rent extraction MNCs face worldwide and lays the foundation for future empirical works.