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Liability of Foreignness in Global Competition? Financial Service MNEs in the City of London


  • Lilach Nachum


This study was inspired by the observation that foreign financial service firms operating in the City of London do not suffer the liability of foreignness to the extent suggested by theory. To examine the reasons for this departure from theory, the study advances a theoretical framework that distinguishes between three types of advantages that together account for the competitive performance of MNEs relative to that of indigenous firms. Empirical analyses of a sample of 296 foreign financial service firms in the City of London shows that in this particular context major sources of competitive performance are the firm-specific advantages and the advantages of multinationality, where British firms may not necessarily possess an advantage over foreign firms. An examination of the validity of the findings, in order to assess the extent to which this situation is unique to the City of London or rather signifies a more general trend that requires theoretical modifications and extensions, is emphasised as a major task for future research.

Suggested Citation

  • Lilach Nachum, 2002. "Liability of Foreignness in Global Competition? Financial Service MNEs in the City of London," Working Papers wp229, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp229
    Note: PRO-1

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    Financial services; City of London; Liability of foreignness; Global competition;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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