Foreignness research in international business: Major streams and future directions

Abstract

Foreignness has long been a central construct in international business research, with research streams examining its conceptualizations, manifestations, and consequences. Researchers started by taking foreignness to be a liability, then later considered the possibility of its being an asset. A still more recent view is that foreignness is an organizational identity that a firm can purposefully manage. Broadly conceived, foreignness is an umbrella construct that directly or tangentially covers research on country of origin, institutional distance, firm-specific advantages, and the ownership–location–internalization eclectic paradigm. We review the body of research on foreignness and track the evolution of its four streams, liability of foreignness, asset of foreignness, drivers of foreignness, and firm responses to foreignness. We call for a clearer conceptualization and a sounder theoretical grounding of the foreignness construct, more integration of the liability of foreignness and the asset of foreignness research streams, greater attention to the multiple strategies firms use to manage foreignness, and the extension of the field to less-explored contexts such as emerging economies, digitalization, and de-globalization.

Beauty in the Eyes of the Beholders: How Government- and Consumer-Based Country-of-Origin Advantages and Disadvantages Drive Host Country Investment Dynamics

“…We argue that there are variations in the advantage and disadvantage created by the country of origin on firm’s investments. Most studies focus on their liability of being foreign, with fewer studies that focus on their advantage of being foreign at the multinational firm and subsidiary levels (Caussat, 2019 ; Hymer, 1976 ; Lu et al, 2022 ; Zaheer, 1995 ). By taking into account the different actors in the host country, in this case, the government and consumers, we argue that the liability and advantage depend on how these actors view the same country of origin of foreign firms relative to other foreign firms, rather than whether they are foreign or non-foreign.…”

“…However, these studies pay little attention to how the country of origin affects firms themselves (Yu & Liu, 2018 ). On the other hand, the literature on the liability of foreignness focuses on the firm level and typically argues that subsidiaries of multinational firms face a competitive disadvantage as they incur additional costs that host-country firms do not (Caussat et al, 2019 ; Hymer, 1976 ; Zaheer, 1995 ; for a recent review, see Lu et al, 2022 ). A later literature discussed the advantage of foreignness that subsidiaries of foreign firms enjoy over domestic firms because of their privileged access to foreign technology (Nachum, 2010 ; Un, 2016 ).…”

“…These ideas and their explanations contribute to international business research and its study of foreign market expansion (Hymer, 1976 ; Lu et al, 2022 ; Un, 2011 ; Zaheer, 1995 ), and to the resource-based view and its analysis of resources and advantage (Barney, 1991 ; Patnaik et al, 2022 ; Teece et al, 1997 ; Wernerfelt, 1984 ). First, regarding foreign market expansion (Lu et al, 2022 ), the paper discusses the disadvantage and advantage associated with the country of origin, which is still limited in the literature on foreignness (Benischke et al, 2022 ).…”

“…These ideas and their explanations contribute to international business research and its study of foreign market expansion (Hymer, 1976 ; Lu et al, 2022 ; Un, 2011 ; Zaheer, 1995 ), and to the resource-based view and its analysis of resources and advantage (Barney, 1991 ; Patnaik et al, 2022 ; Teece et al, 1997 ; Wernerfelt, 1984 ). First, regarding foreign market expansion (Lu et al, 2022 ), the paper discusses the disadvantage and advantage associated with the country of origin, which is still limited in the literature on foreignness (Benischke et al, 2022 ). Most foreignness studies have focused primarily on subsidiaries of foreign multinational firms abroad, treating them as a monolithic group and comparing them to host-country firms to identify their liability and advantage of foreignness (Hymer, 1976 ; Un, 2016 ; Zaheer, 1995 ).…”

The Many Faces of Distance – A Typology of Distance in Management

“…In international management, distance is mostly seen as being an element of liability of foreignness (Rugman, Verbeke, & Nguyen, 2011), though some authors have challenged this notion and suggested concepts such as "friction" (Shenkar, 2001;Shenkar et al, 2008;Shenkar, 2012), "liability of outsidership" (Johanson & Vahlne, 2009), or "liability of newness and smallness" (Puthusserry, Child, & Rodrigues, 2014) instead. These new metaphors have themselves also been criticized for conveying negative effects of difference (Drogendijk & Zander, 2010), since foreignness can also be an asset for a company (Edman, 2016;Lu, Ma, & Xie, 2021).…”