Assets or Liabilities of Foreignness? On the Role of TNCs in International Business
AbstractCross-border activities of firms are said to be risky and complicated due to so-called 'liabilities of foreignness' (LOF) (Zaheer & Mosakowski 1997; Zaheer 1995). These LOF are difficulties firms in general have to face when acting in environments they are not familiar with. The existence of LOF seems to delimit the scope of action of firms by triggering a need to adapt to the foreign business environment. Focusing on transnational companies (TNCs) - a specific firm type in international business that is a kind of 'footloose' and not deeply embedded in its country of origin (Bartlett & Ghoshal 1989) - it is necessary to understand the influence LOF have on business operations in detail as TNCs face LOF in every business environment they enter. Although we acknowledge the existence of LOF and their influence on TNC business operations, we argue that TNCs are by owning 'assets of foreignness' (AOF) (Nachum, 2010) able to overcome the barriers set by LOF. We rely on the competence-based theory of the firm (CbTF) (Freiling et al. 2008; Foss & Ishikawa 2007) as frame of reference and ask: What kinds of AOF do TNCs own and how far do these assets enable TNCs to overcome LOF? Against this background we identify first causalities that determine the TNC scope of action. Our paper contributes to research by challenging the adaption logic that is very often broadcasted in discussions on reasonable ways companies should react to LOF. It advances research by giving reasons why TNCs may be able to outperform local companies in their local home markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZenTra - Center for Transnational Studies in its series ZenTra Working Papers in Transnational Studies with number 09 / 2012.
Length: 18 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
Liabilities of Foreignness; Assets of Foreignness; Transnational Companies; Competencebased Theory of the Firm;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Finn Marten Koerner).
If references are entirely missing, you can add them using this form.