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 language | English (US) |
|---|---|
| Title of host publication | Dynamics of Globalization |
| Subtitle of host publication | Location-Specific Advantages or Liabilities of Foreignness |
| Editors | Christian Asmussen, Torben Pedersen, Timothy Devinney, Laszlo Tihanyi |
| Pages | 211-233 |
| Number of pages | 23 |
| DOIs | |
| State | Published - Dec 1 2011 |
Publication series
| Name | Advances in International Management |
|---|---|
| Volume | 24 |
| ISSN (Print) | 1571-5027 |
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All Science Journal Classification (ASJC) codes
- Business and International Management
Cite this
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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 proceeding › Conference 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 -