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Liability of foreignness and membership in a regional economic group: Analysis of the European Union

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  • Miller, Stewart R.
  • Richards, Malika
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    Abstract

    This study examines the performance of foreign vs. domestic firms in a regional economic group. In particular, we focus on host country and foreign-owned firms in the European Union. Results provide evidence of a liability of foreignness--foreign-owned firms underperform host country firms. However, there is also evidence that liability of foreignness can vary across countries, and that foreign firms can overcome the liability of foreignness in some host countries, even industrialized ones. The results show the moderating effects of the host country and home country environments on the relative performance of foreign firms. Lastly, the results reveal that foreign-owned banks from highly competitive home countries underperform foreign firms from less competitive home countries.

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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: 323-337

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    Handle: RePEc:eee:intman:v:8:y:2002:i:3:p:323-337

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    Keywords: Liability of foreignness Regional economic group International operations;

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    Cited by:
    1. Sofka, Wolfgang & Zimmermann, Jörg, 2005. "There's no Place Like Home: A Strategic Framework to Overcome Liability of Foreignness in the German Car Market," ZEW Discussion Papers 05-84, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Knowledge sourcing: legitimacy deficits for MNC subsidiaries?," Discussion Paper Series 1: Economic Studies 2009,09, Deutsche Bundesbank, Research Centre.
    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. 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.
    5. Neeltje van Horen & Stijn Claessens, 2009. "Being a Foreigner Among Domestic Banks," IMF Working Papers 09/273, International Monetary Fund.
    6. Sofka, Wolfgang, 2005. "Global Idea Sourcing: An Empirical Investigation into the Mechanisms Behind the Usage of Foreign Business Sources for Innovation," ZEW Discussion Papers 05-53, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. 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.
    8. Claessens, Stijn & van Horen, Neeltje, 2012. "Being a foreigner among domestic banks: Asset or liability?," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1276-1290.
    9. 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.
    10. 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.
    11. Tobias Schmidt & Wolfgang Sofka, 2005. "Lost in Translation - Empirical Evidence for Liability of Foreignness as Barriers to Knowledge Spillovers," Industrial Organization 0512012, EconWPA.
    12. 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.
    13. 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.
    14. Alcantara, Lailani Laynesa & Mitsuhashi, Hitoshi, 2012. "Make-or-Break Decisions in Choosing Foreign Direct Investment Locations," Journal of International Management, Elsevier, vol. 18(4), pages 335-351.

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