Liability of foreignness and internationalisation of emerging market firms

Ajai Gaur, Vikas Kumar, Ravi Sarathy

Research output: Chapter in Book/Report/Conference proceedingConference contribution

37 Citations (Scopus)

Abstract

Liability of foreignness (LOF) is a well-known concept in international business domain. At the core of LOF is the insight that firms face social and economic costs when they operate in foreign markets. Extant literature acknowledges that the ability of firms to overcome LOF in host locations varies; however, it does not discuss the possibility that the LOF itself could vary for different firms at the same location. We extend this literature by examining how a firm's interaction with the host and the home country environments affect the LOF that it faces in foreign markets. We argue that there are two sources of LOF - environmentally derived LOF and firm-based LOF. The environmentally derived LOF has its source in home and host country environments. Firm-based LOF, on the contrary, derives from firm-specific characteristics including ownership structure, firm-specific resources, learning and network-based linkages such as affiliation to a business group. Furthermore, we argue that both the environmentally derived and the firm-based LOF are different for emerging market (EM) firms as compared to developed market (DM) firms. We develop testable propositions about how environment-specific and firm-specific factors affect LOF and suggest directions for future research.

Original languageEnglish (US)
Title of host publicationDynamics of Globalization
Subtitle of host publicationLocation-Specific Advantages or Liabilities of Foreignness
EditorsChristian Asmussen, Torben Pedersen, Timothy Devinney, Laszlo Tihanyi
Pages211-233
Number of pages23
DOIs
StatePublished - Dec 1 2011

Publication series

NameAdvances in International Management
Volume24
ISSN (Print)1571-5027

Fingerprint

Emerging market firms
Internationalization
Liability of foreignness
Home country
Firm-specific characteristics
Firm-specific factors
Social costs
Interaction
Ownership structure
Economic cost
Linkage
International business
Resources
Host country
Business groups

All Science Journal Classification (ASJC) codes

  • Business and International Management

Cite this

Gaur, A., Kumar, V., & Sarathy, R. (2011). Liability of foreignness and internationalisation of emerging market firms. In C. Asmussen, T. Pedersen, T. Devinney, & L. Tihanyi (Eds.), Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness (pp. 211-233). (Advances in International Management; Vol. 24). https://doi.org/10.1108/S1571-5027(2011)0000024016
Gaur, Ajai ; Kumar, Vikas ; Sarathy, Ravi. / Liability of foreignness and internationalisation of emerging market firms. Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness. editor / Christian Asmussen ; Torben Pedersen ; Timothy Devinney ; Laszlo Tihanyi. 2011. pp. 211-233 (Advances in International Management).
@inproceedings{e3f443bff6e141f0a40392be9a6be361,
title = "Liability of foreignness and internationalisation of emerging market firms",
abstract = "Liability of foreignness (LOF) is a well-known concept in international business domain. At the core of LOF is the insight that firms face social and economic costs when they operate in foreign markets. Extant literature acknowledges that the ability of firms to overcome LOF in host locations varies; however, it does not discuss the possibility that the LOF itself could vary for different firms at the same location. We extend this literature by examining how a firm's interaction with the host and the home country environments affect the LOF that it faces in foreign markets. We argue that there are two sources of LOF - environmentally derived LOF and firm-based LOF. The environmentally derived LOF has its source in home and host country environments. Firm-based LOF, on the contrary, derives from firm-specific characteristics including ownership structure, firm-specific resources, learning and network-based linkages such as affiliation to a business group. Furthermore, we argue that both the environmentally derived and the firm-based LOF are different for emerging market (EM) firms as compared to developed market (DM) firms. We develop testable propositions about how environment-specific and firm-specific factors affect LOF and suggest directions for future research.",
author = "Ajai Gaur and Vikas Kumar and Ravi Sarathy",
year = "2011",
month = "12",
day = "1",
doi = "10.1108/S1571-5027(2011)0000024016",
language = "English (US)",
isbn = "9780857249913",
series = "Advances in International Management",
pages = "211--233",
editor = "Christian Asmussen and Torben Pedersen and Timothy Devinney and Laszlo Tihanyi",
booktitle = "Dynamics of Globalization",

}

Gaur, A, Kumar, V & Sarathy, R 2011, Liability of foreignness and internationalisation of emerging market firms. in C Asmussen, T Pedersen, T Devinney & L Tihanyi (eds), Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness. Advances in International Management, vol. 24, pp. 211-233. https://doi.org/10.1108/S1571-5027(2011)0000024016

Liability of foreignness and internationalisation of emerging market firms. / Gaur, Ajai; Kumar, Vikas; Sarathy, Ravi.

Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness. ed. / Christian Asmussen; Torben Pedersen; Timothy Devinney; Laszlo Tihanyi. 2011. p. 211-233 (Advances in International Management; Vol. 24).

Research output: Chapter in Book/Report/Conference proceedingConference contribution

TY - GEN

T1 - Liability of foreignness and internationalisation of emerging market firms

AU - Gaur, Ajai

AU - Kumar, Vikas

AU - Sarathy, Ravi

PY - 2011/12/1

Y1 - 2011/12/1

N2 - Liability of foreignness (LOF) is a well-known concept in international business domain. At the core of LOF is the insight that firms face social and economic costs when they operate in foreign markets. Extant literature acknowledges that the ability of firms to overcome LOF in host locations varies; however, it does not discuss the possibility that the LOF itself could vary for different firms at the same location. We extend this literature by examining how a firm's interaction with the host and the home country environments affect the LOF that it faces in foreign markets. We argue that there are two sources of LOF - environmentally derived LOF and firm-based LOF. The environmentally derived LOF has its source in home and host country environments. Firm-based LOF, on the contrary, derives from firm-specific characteristics including ownership structure, firm-specific resources, learning and network-based linkages such as affiliation to a business group. Furthermore, we argue that both the environmentally derived and the firm-based LOF are different for emerging market (EM) firms as compared to developed market (DM) firms. We develop testable propositions about how environment-specific and firm-specific factors affect LOF and suggest directions for future research.

AB - Liability of foreignness (LOF) is a well-known concept in international business domain. At the core of LOF is the insight that firms face social and economic costs when they operate in foreign markets. Extant literature acknowledges that the ability of firms to overcome LOF in host locations varies; however, it does not discuss the possibility that the LOF itself could vary for different firms at the same location. We extend this literature by examining how a firm's interaction with the host and the home country environments affect the LOF that it faces in foreign markets. We argue that there are two sources of LOF - environmentally derived LOF and firm-based LOF. The environmentally derived LOF has its source in home and host country environments. Firm-based LOF, on the contrary, derives from firm-specific characteristics including ownership structure, firm-specific resources, learning and network-based linkages such as affiliation to a business group. Furthermore, we argue that both the environmentally derived and the firm-based LOF are different for emerging market (EM) firms as compared to developed market (DM) firms. We develop testable propositions about how environment-specific and firm-specific factors affect LOF and suggest directions for future research.

UR - http://www.scopus.com/inward/record.url?scp=84864425287&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84864425287&partnerID=8YFLogxK

U2 - 10.1108/S1571-5027(2011)0000024016

DO - 10.1108/S1571-5027(2011)0000024016

M3 - Conference contribution

SN - 9780857249913

T3 - Advances in International Management

SP - 211

EP - 233

BT - Dynamics of Globalization

A2 - Asmussen, Christian

A2 - Pedersen, Torben

A2 - Devinney, Timothy

A2 - Tihanyi, Laszlo

ER -

Gaur A, Kumar V, Sarathy R. Liability of foreignness and internationalisation of emerging market firms. In Asmussen C, Pedersen T, Devinney T, Tihanyi L, editors, Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness. 2011. p. 211-233. (Advances in International Management). https://doi.org/10.1108/S1571-5027(2011)0000024016