The Dynamics of the Liability of Foreignness: A Global Study of Survival in Financial Services

Abstract

We study the impact of ‘foreignness’ on survival in interbank currency trading worldwide over the period 1974–93. In particular, we develop hypotheses on the behavior of the liability of foreignness over time, and on the consequences of evolving sources of firm‐level competitive advantage on this liability. We test these hypotheses on the population of 2667 market‐making trading rooms located in 47 countries worldwide that either existed in 1974 or entered the industry between 1974 and 1993. The results show that there is a liability of foreignness, and that it changes over time. Further, strategic and organizational factors such as the adoption of technology by these firms and their mode of internal control significantly influenced survival, as did location‐related factors such as the intensity of local and foreign competition. © 1997 by John Wiley & Sons, Ltd.

Corporate political strategy and liability of foreignness: Similarities and differences between local and foreign firms in the South African Health Sector

“…(b) In industries such as healthcare, ''foreignness'' may actually provide an advantage over local firms. In contexts where there are a high percentage of foreign firms, foreignness could be seen as an asset (Zaheer & Mosakowski, 1997) and even more so in industries with high value intellectual property and scale requirements. Additionally, in healthcare there is an agency relationship in that the final customer (patient) is reliant on others, such as the doctor and funder, to make the decision on what product is used.…”

“…This allows MNEs to acquire cultural knowledge that aligns internal and external business practices with local stakeholder expectations (Mezias, 2002;Zaheer & Mosakowski, 1997).…”

“…These added costs arise from multiple sources, such as unfamiliarity with the local environment, cultural, political and economic differences, higher coordination cost across geographic distances, a lack of information networks or political influence; or the inability to appeal to local, patriotic customers (Zaheer, 1995;Zaheer & Mosakowski, 1997). According to Sethi and Guisinger (2002) it is important that LOF be differentiated from two other concepts: lack of fit, which occurs where firm strategy is incompatible with the environment, and liability of newness, which is the high failure rate associated with new organisations and these challenges can be incurred by both domestic and multinational organisations.…”

“…In the field of non-market strategy, this divergent view translates into whether foreign firms bring their experience to the new host country, or whether they attempt to align their local strategy with the best-performing domestic models. LOF is also likely to be heightened in simple, market seeking, horizontal MNEs where the subsidiaries are essentially replicas that aim to compete in different national markets (Zaheer, 1995;Zaheer & Mosakowski, 1997). Suppliers of healthcare products would fall into this category.…”

International Development Strategies of Luxury-goods Players in China

“…Subsequently, a number of studies have focused mainly on the content of international management (Doz, 1980;Doz, Bartlett, & Prahalad, 1981;Hamel & Prahalad, 1983;Prahalad & Doz, 1987;Bartlett & Ghoshal, 1987, 1988, 1992. Any business wishing to expand into new international markets needs to be well equipped with management and organisational skills (Zaheer, 1995;Zaheer & Mosakowski, 1997).…”