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How to identify liabilities of foreignness and assess their effects on multinational corporations

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  • Mezias, John M.
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    Abstract

    This article examines the liabilities of foreignness construct and discusses key methodological and research design issues facing liability of foreignness researchers. After reviewing past studies and more recent liabilities of foreignness research, I discuss definitional issues related to this construct. I then present a two-part research framework designed to first help identify a specific liability of foreignness in a focal country, and then help identify factors that minimize the effects of that specific liabilities of foreignness. I also discuss multinational management issues at the corporation level that likely affect liabilities of foreignness experienced at the foreign subsidiary level.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1075425302000698
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Management.

    Volume (Year): 8 (2002)
    Issue (Month): 3 ()
    Pages: 265-282

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    Handle: RePEc:eee:intman:v:8:y:2002:i:3:p:265-282

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    Related research

    Keywords: Liability of foreignness Foreign direct investment Foreign subsidiaries Multinational management;

    References

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    1. Chwo-Ming J Yu & Kiyohiko Ito, 1988. "Oligopolistic Reaction and Foreign Direct Investment: The Case of the U.S. Tire and Textiles Industries," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 449-460, September.
    2. Linda Argote & Sara L. Beckman & Dennis Epple, 1990. "The Persistence and Transfer of Learning in Industrial Settings," Management Science, INFORMS, vol. 36(2), pages 140-154, February.
    3. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
    4. Dunning, John H, 1973. "The Determinants of International Production," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 289-336, November.
    5. Horst, Thomas, 1972. "Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 258-66, August.
    6. Caves, Richard E, 1974. "Causes of Direct Investment: Foreign Firms' Shares in Canadian and United Kingdom Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 279-93, August.
    7. Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August.
    8. Edward Brown Flowers, 1976. "Oligopolistic Reactions in European and Canadian Direct Investment in the United States," Journal of International Business Studies, Palgrave Macmillan, vol. 7(2), pages 43-56, June.
    9. Hennart, J.-F. & Park, Y.R., 1994. "Location, governance and strategic determinants of Japanese manufacturing investment in the United States," Open Access publications from Tilburg University urn:nbn:nl:ui:12-174010, Tilburg University.
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    Citations

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    Cited by:
    1. Wolfgang Sofka & Jörg Zimmermann, 2007. "Regional Dimensions of Liability of Foreignness: Between a Rock and a Hard Place?," Papers on Entrepreneurship, Growth and Public Policy 2007-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    2. Ahmad Arslan, 2012. "Impacts of institutional pressures and the strength of market supporting institutions in the host country on the ownership strategy of multinational enterprises: theoretical discussion and proposition," Journal of Management and Governance, Springer, vol. 16(1), pages 107-124, February.
    3. Sofka, Wolfgang & Zimmermann, Jörg, 2008. "Regional economic stress as moderator of liability of foreignness," Journal of International Management, Elsevier, vol. 14(2), pages 155-172, June.
    4. Barnard, Helena, 2010. "Overcoming the liability of foreignness without strong firm capabilities -- the value of market-based resources," Journal of International Management, Elsevier, vol. 16(2), pages 165-176, June.
    5. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Liability of foreignness as a barrier to knowledge spillovers: Lost in translation?," Journal of International Management, Elsevier, vol. 15(4), pages 460-474, December.
    6. Schmiele, Anja & Sofka, Wolfgang, 2007. "Internationalizing R&D Co-opetition: Dress for the Dance with the Devil," ZEW Discussion Papers 07-045, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Elango, B., 2009. "Minimizing effects of 'liability of foreignness': Response strategies of foreign firms in the United States," Journal of World Business, Elsevier, vol. 44(1), pages 51-62, January.
    8. Alcantara, Lailani & Mitsuhashi, Hitoshi & Hoshino, Yasuo, 2006. "Legitimacy in international joint ventures: It is still needed," Journal of International Management, Elsevier, vol. 12(4), pages 389-407, December.
    9. repec:emp:wpaper:ec8-127-i is not listed on IDEAS
    10. Jisun Yu & Sung Kim, 2013. "Understanding liability of foreignness in an Asian business context: A study of the Korean asset management industry," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1191-1217, December.
    11. Naoki Ando & Dong Kee Rhee & Namgyoo Park, 2008. "Parent country nationals or local nationals for executive positions in foreign affiliates: An empirical study of Japanese affiliates in Korea," Asia Pacific Journal of Management, Springer, vol. 25(1), pages 113-134, January.
    12. Jörg Zimmermann & Wolfgang Sofka, 2013. "Knowledge search versus knowledge deployment: How foreignness can be both an asset and a liability for firms," JRC-IPTS Working Papers on Corporate R&D and Innovation 2013-03, Institute of Prospective Technological Studies, Joint Research Centre.
    13. Rammer, Christian & Schmiele, Anja, 2008. "Drivers and Effects of Internationalising Innovation by SMEs," ZEW Discussion Papers 08-035 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    14. Denk, Nikola & Kaufmann, Lutz & Roesch, Jan-Frederik, 2012. "Liabilities of Foreignness Revisited: A Review of Contemporary Studies and Recommendations for Future Research," Journal of International Management, Elsevier, vol. 18(4), pages 322-334.
    15. Wolfgang Sofka, 2005. "Global Idea Sourcing - An empirical investigation into the mechanisms behind the usage of foreign business sources for innovation," Industrial Organization 0509004, EconWPA.
    16. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Knowledge sourcing: legitimacy deficits for MNC subsidiaries?," Discussion Paper Series 1: Economic Studies 2009,09, Deutsche Bundesbank, Research Centre.
    17. de Jong, Gjalt & van Houten, Jerry, 2014. "The impact of MNE cultural diversity on the internationalization-performance relationship," International Business Review, Elsevier, vol. 23(1), pages 313-326.
    18. Anja Schmiele, 2008. "Drivers and Effects of Internationalising Innovation by SMEs," Working Papers id:1547, eSocialSciences.

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