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The Pulse of Liability of Foreignness: Dynamic Legitimacy and Experience Effects in the German Car Market

  • Ulrich Kaiser

    (University of Southern Denmark)

  • Wolfgang Sofka

    (Centre for European Economic Research)

Cultural and social borders can be stumbling blocks to internationalization (frequent errors, delays). We investigate the persistent roots of liability of foreignness and identify two major factors conceptually: a lack of host country legitimacy (demand side) and a lack of responsiveness on the side of the multinational corporation. Empirical testing for the German car market reveals an interaction between the two factors. For less experienced customer groups, we find that legitimacy is the dominant factor behind the effects of liability of foreignness. As customer experience increases, liability of foreignness caused by a lack of responsiveness becomes more of an issue.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2007-01.

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Length: 26 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:kud:kuieci:2007-01
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  1. Studies on the automobile industry
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