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Regional Dimensions of Liability of Foreignness: Between a Rock and a Hard Place?

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Author Info
Wolfgang Sofka
Jörg Zimmermann ()

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Abstract

In this paper we develop optimized localization strategies for multinational firms to overcome their liability of foreignness by adding a regional dimension. We explore conceptually whether economic stress in a region has a mitigating or reinforcing effect. We test this analytical framework empirically on the highly internationalized German car market and find that economically depressed regions are promising stepping stones into foreign markets.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2007-12.

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Length: 28 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:esi:egpdis:2007-12

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Related research
Keywords: Liability of foreignness; multinational strategy; automotive market;

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This paper has been announced in the following NEP Reports: This item is featured on the following reading lists:
  1. Studies on the automobile industry
References listed on IDEAS
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  1. Berkovec, James & Rust, John, 1985. "A nested logit model of automobile holdings for one vehicle households," Transportation Research Part B: Methodological, Elsevier, vol. 19(4), pages 275-285, August. [Downloadable!] (restricted)
  2. Frank Verboven, 2002. "Quality-Based Price Discrimination and Tax Incidence: Evidence from Gasoline and Diesel Cars," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 275-297, Summer.
  3. Brownstone, David & Bunch, David S. & Train, Kenneth, 2000. "Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles," Transportation Research Part B: Methodological, Elsevier, vol. 34(5), pages 315-338, June. [Downloadable!] (restricted)
  4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  5. Gurhan-Canli, Zeynep & Maheswaran, Durairaj, 2000. " Determinants of Country-of-Origin Evaluations," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 27(1), pages 96-108, June.
  6. Goldberg, Pinelopi Koujianou & Verboven, Frank, 2001. "The Evolution of Price Dispersion in the European Car Market," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 811-48, October.
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  7. Verboven, Frank, 2002. "Testing for 'Monopoly' Market Power When Products Are Differentiated in Quality," Manchester School, University of Manchester, vol. 70(1), pages 115-33, January. [Downloadable!] (restricted)
  8. Sofka, Wolfgang, 2006. "Innovation Activities Abroad and the Effects of Liability of Foreignness: Where it Hurts," ZEW Discussion Papers 06-29, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  9. Michael D Lord & Annette L Ranft, 2000. "Organizational Learning About New International Markets: Exploring the Internal Transfer of Local Market Knowledge," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 31(4), pages 573-589, December. [Downloadable!] (restricted)
  10. Pinelopi Koujianou Goldberg & Frank Verboven, 2004. "Cross-country price dispersion in the euro era: a case study of the European car market," Economic Policy, CEPR, CES, MSH, vol. 19(40), pages 483-521, October. [Downloadable!] (restricted)
  11. Srilata Zaheer & Akbar Zaheer, 1997. "Country Effects on Information Seeking in Global Electronic Networks," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 28(1), pages 77-100, March. [Downloadable!] (restricted)
  12. DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-36, November. [Downloadable!] (restricted)
  13. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  14. Wan, Guang H, 1998. "Nonparametric Measurement of Preference Changes: The Case of Food Demand in Rural China," Applied Economics Letters, Taylor and Francis Journals, vol. 5(7), pages 433-36, July. [Downloadable!] (restricted)
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