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Sources of and Responses to the Liability of Foreignness: The Case of Korean Companies in the Netherlands


  • Bas Daamen
  • Jean-Francois Hennart
  • Dong-Jae Kim
  • Young-Ryeol Park


This study aims to investigate the liability of foreignness, or the additional difficulties of foreign companies compared to their local competitors. Past studies have found fair amount of empirical evidences for the liability of foreignness. The present study attempts to take one step further by addressing two questions: what are the sources of such disadvantages and what are the solutions sought by the companies? To do this, we conducted a field study exploring the on-going dynamics of foreign multinationals. Specifically, we collected primary data through interviews with Dutch and Korean managers of Korean multinational companies. Through the interviews, we found evidence for the existence of such disadvantages. We identified four sources of the liability of foreignness—cross-border transfer, interaction with the local government, local discrimination, and interaction within the multinational—and two ways in which these companies actively reduced their exposure to the problem—localization and unfamiliarity reduction. This study should be useful to both practitioners and theorists in international business with an interest in disadvantages connected to the foreign status of a company.

Suggested Citation

  • Bas Daamen & Jean-Francois Hennart & Dong-Jae Kim & Young-Ryeol Park, 2007. "Sources of and Responses to the Liability of Foreignness: The Case of Korean Companies in the Netherlands," Global Economic Review, Taylor & Francis Journals, vol. 36(1), pages 17-35.
  • Handle: RePEc:taf:glecrv:v:36:y:2007:i:1:p:17-35 DOI: 10.1080/12265080701217165

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    References listed on IDEAS

    1. Will Martin & Kym Anderson, 2006. "Agricultural Trade Reform and the Doha Development Agenda," World Bank Publications, The World Bank, number 6889.
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    4. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2005. "Global impacts of Doha trade reform scenarios on poverty," Policy Research Working Paper Series 3735, The World Bank.
    5. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages 22-49, February.
    6. Hertel, Thomas W. & Winters, L. Alan, 2005. "Poverty impacts of a WTO agreement : synthesis and overview," Policy Research Working Paper Series 3757, The World Bank.
    7. Zhai, Fan & Hertel, Thomas, 2005. "Impacts of the Doha Development Agenda on China : the role of labor markets and complementary education reforms," Policy Research Working Paper Series 3702, The World Bank.
    8. Thomas W. Hertel & L. Alan Winters, 2006. "Poverty and the WTO : Impacts of the Doha Development Agenda," World Bank Publications, The World Bank, number 7411.
    9. L. Alan Winters, 2000. "Trade Liberalisation and Poverty," PRUS Working Papers 07, Poverty Research Unit at Sussex, University of Sussex.
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    Cited by:

    1. John P. Weche Geluebcke, 2011. "Foreign Ownership and Firm Performance in German Services: First Evidence based on Official Statistics," Working Paper Series in Economics 213, University of Lüneburg, Institute of Economics.
    2. repec:kap:jbuset:v:142:y:2017:i:4:d:10.1007_s10551-015-2897-5 is not listed on IDEAS


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