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

  • Wolfgang Sofka
  • Jörg Zimmermann

    ()

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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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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  1. Brownstone, David & Bunch, David S & Train, Kenneth, 1999. "Joint mixed logit models of stated and revealed preferences for alternative-fuel vehicles," University of California Transportation Center, Working Papers qt45f996hh, University of California Transportation Center.
  2. Saeed Samiee & Terence A Shimp & Subhash Sharma, 2005. "Brand origin recognition accuracy: its antecedents and consumers’ cognitive limitations," Journal of International Business Studies, Palgrave Macmillan, vol. 36(4), pages 379-397, July.
  3. 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.
  4. 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.
  5. Pinelopi Koujianou Goldberg & Frank Verboven, 1998. "The Evolution of Price Dispersion in the European Car Market," NBER Working Papers 6818, National Bureau of Economic Research, Inc.
  6. 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.
  7. Guang Wan, 1998. "Nonparametric measurement of preference changes: the case of food demand in rural China," Applied Economics Letters, Taylor & Francis Journals, vol. 5(7), pages 433-436.
  8. Srilata Zaheer & Akbar Zaheer, 1997. "Country Effects on Information Seeking in Global Electronic Networks," Journal of International Business Studies, Palgrave Macmillan, vol. 28(1), pages 77-100, March.
  9. 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..
  10. Luo, Yadong & Shenkar, Oded & Nyaw, Mee-Kau, 2002. "Mitigating liabilities of foreignness: Defensive versus offensive approaches," Journal of International Management, Elsevier, vol. 8(3), pages 283-300.
  11. Mezias, John M., 2002. "How to identify liabilities of foreignness and assess their effects on multinational corporations," Journal of International Management, Elsevier, vol. 8(3), pages 265-282.
  12. Miller, Stewart R. & Richards, Malika, 2002. "Liability of foreignness and membership in a regional economic group: Analysis of the European Union," Journal of International Management, Elsevier, vol. 8(3), pages 323-337.
  13. 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, vol. 31(4), pages 573-589, December.
  14. Bunch, David S. & Bradley, Mark & Golob, Thomas F. & Kitamura, Ryuichi & Occhiuzzo, Gareth P., 1993. "Demand for clean-fuel vehicles in California: A discrete-choice stated preference pilot project," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(3), pages 237-253, May.
  15. Gurhan-Canli, Zeynep & Maheswaran, Durairaj, 2000. " Determinants of Country-of-Origin Evaluations," Journal of Consumer Research, University of Chicago Press, vol. 27(1), pages 96-108, June.
  16. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  17. 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.
  18. Petersen, Bent & Pedersen, Torben, 2002. "Coping with liability of foreignness: Different learning engagements of entrant firms," Journal of International Management, Elsevier, vol. 8(3), pages 339-350.
  19. 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.
  20. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
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