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

Author

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  • Ulrich Kaiser

    (University of Southern Denmark)

  • Wolfgang Sofka

    (Centre for European Economic Research)

Abstract

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.

Suggested Citation

  • Ulrich Kaiser & Wolfgang Sofka, 2007. "The Pulse of Liability of Foreignness: Dynamic Legitimacy and Experience Effects in the German Car Market," CIE Discussion Papers 2007-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  • Handle: RePEc:kud:kuieci:2007-01
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    References listed on IDEAS

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    Cited by:

    1. Leheyda, Nina, 2008. "Private Incentives to Innovate: Interplay of New Products and Brand-Name Reputation," ZEW Discussion Papers 08-120, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Leheyda, Nina, 2008. "Geographical and Multi-product Linkages of Markets: Impact on Firm Equilibrium Interactions (Some Evidence from the European Car Market)," ZEW Discussion Papers 08-119, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    liability of foreignness; internationalization strategy; globalization;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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    1. Studies on the automobile industry

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