Overcoming the liability of foreignness without strong firm capabilities — the value of market-based resources

Abstract

The concept of "liability of foreignness" -the costs of doing business abroad -has been known and discussed since the mid-1970s. At the core of these discussions is the role that firm capabilities play in overcoming or limiting these costs. This raises the question of how firms with inappropriate, limited or constrained capabilities relative to their host environment overcome the liability of foreignness. This paper focuses on the subsidiaries of "emerging multinationals" and how they manage the demands of a technologically and economically highly developed host country. A host location with sophisticated markets and well-developed institutional infrastructure may be a highly challenging environment for firms that have grown their organizational capabilities in less developed contexts. This paper explores that situation and considers how resources available on the market -for example through supplier inputs -assist subsidiaries to benefit from their presence in a munificent location. Despite the acknowledged limitations of a transaction-based approach, this paper presents evidence that purchasing knowledge provides an accessible strategy for overcoming some liabilities of foreignness.

Competitive strategies of late followers in auto industry: Case study Hyundai-Kia

“…Recent business success of MNCs from emerging markets in technology intensive industries questions these conclusions and shows that they even have the capabilities to generate disrupting innovation. Emerging markets MNCs combine own strategic resources, strategic advantage of domestic market and market base resources from developed countries to achieve and sustain competitive advantage (Barnard, 2010). This strategy leads to improvement of MNC's absorptive capacity.…”

Factors Affecting the Acceptance and Functioning of Foreign Subsidiary Performance: Examining Environmental Conditions and Corporate and Ethical Legitimacy

“…Several studies have looked at how foreign companies can respond to the challenge of LOF and offer suggestions to overcome it, such as selecting a mode of entry [3,7], the use of local managers in decision making [8], learning about the local environment and adapting to the environment [9], offering more product diversity and joining a business group [10] and the acquisition of market-based resources at the host site, such as skilled staff and so on [11]. Overall, these studies point that the risks associated with the non-acceptance of a foreign company are usually during the time when they gain market knowledge and gain local experience in a particular location [12].…”

Internacionalização De Empresas Brasileiras Para Angola: Desafios E Oportunidades

“…No caso de empresas com nenhuma ou insignificante vantagem específica, o risco da "liability of foreignness" é ainda maior (BARNARD, 2010). Assim, a rede de contatos e de relacionamento é um mecanismo para superar o obstáculo do estrangeirismo e penetrar no mercado local NARULA, 2004).…”

“…Os mercados emergentes estão transformando o cenário dos negócios internacionais ( VAN AGTMAEL, 2007;GAMMELTOFT, 2008), tornando-o ainda mais multifacetado e competitivo (GAMMELTOFT; BARNARD;MADHOK, 2010). Diante disso, a dimensão e a capacidade de articulação de um governo exercem o poder de suportar ou frear de forma direta e legítima a internacionalização de suas empresas nacionais.…”