Mitigating liabilities of foreignness: Defensive versus offensive approaches
Finding effective mechanisms that can overcome liabilities of foreignness (LOFs) is the central issue in the study of LOFs. This study proposes that such mechanisms comprise defensive options and offensive options. Defensive mechanisms include contract protection, parental control, parental service, and output standardization. Offensive mechanisms include local networking, resource commitment, legitimacy improvement, and input localization. Using China as an analytical setting, this study emphasizes two prominent yet distinct mechanisms: contract protection and local networking ("guanxi" in Chinese). Contracts and guanxi mitigate the LOF via different paths: Contracts negate LOFs by safeguarding invested resources, curtailing operational uncertainty, and reducing coordination costs, whereas guanxi neutralizes LOFs through increasing indigenous adaptability, improving organizational legitimacy, and heightening cooperation with the local business community. Our analysis of 92 sample MNEs in China suggests that contracts and guanxi exert different influences on the consequences of LOFs. Contracts reduce production and marketing costs but do not stimulate sales revenues. Guanxi, however, enhances sales revenues but does not reduce production and marketing costs. This study also documents that contracts and guanxi operate as complements in overcoming LOFs.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 8 (2002)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/bibliographic|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-61, October.
- Anderlini, L. & Felli, L., 1993.
"Incomplete Written Contracts: Undescribable States of Nature,"
183, Cambridge - Risk, Information & Quantity Signals.
- Luca Anderlini & Leonardo Felli, 1994. "Incomplete Written Contracts: Undescribable States of Nature," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1085-1124.
- Kendall Roth & David M Schweiger & Allen J Morrison, 1991. "Global Strategy Implementation at the Business Unit Level: Operational Capabilities and Administrative Mechanisms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(3), pages 369-402, September.
- Nathan Fagre & Louis T Wells, 1982. "Bargaining Power of Multinationals and Host Governments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 13(2), pages 9-24, June.
- J Michael Geringer & Louis Hebert, 1989. "Control and Performance of International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(2), pages 235-254, June.
- Al-Najjar, Nabil I, 1995. "Incomplete Contracts and the Governance of Complex Contractual Relationships," American Economic Review, American Economic Association, vol. 85(2), pages 432-36, May.
- Oded Shenkar & Yoram Zeira, 1992. "Role Conflict and Role Ambiguity of Chief Executive Officers in International Joint Ventures," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 55-75, March.
When requesting a correction, please mention this item's handle: RePEc:eee:intman:v:8:y:2002:i:3:p:283-300. See general 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: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.