Skip to main content
SpringerLink
Log in

Liability of Emergingness of Emerging Market Multinationals in Developed Markets: A Conceptual Approach

  • Chapter
Experiences of Emerging Economy Firms

Abstract

In foreign markets, multinational enterprises (MNEs) need to manage in host countries applying the given rules of the game (North, 1990). While some foreign companies successfully manage a new institutional environment, others are not able to gain legitimacy and have difficulties in overcoming their liability of foreignness (LOF). LOF can arise from different sources, such as geographic distance between home and host countries, the foreign company’s unfamiliarity with the host-country specifics or unfavorable treatments of host-country nationals (Hymer, 1976; Zaheer, 1995). It weakens a company’s competitive advantage in foreign markets and consequently needs to be mitigated (Luo and Mezias, 2002; Luo, Shenkar and Nyaw, 2002; Suchman, 1995).

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 84.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Alkire, T. D. and Avey, J. B. (2013). Psychological capital and the intent to pursue employment with developed and emerging market multinational corporations. Human Resource Development International, 16(1): 40–55.

    Article  Google Scholar 

  • Aybar, B. and Thirunavukkarasu, A. (2005). Emerging market multinationals: An analysis of performance and risk characteristics. Journal of Asia-Pacific Business, 6(2): 5–39.

    Article  Google Scholar 

  • Backhaus, K. B. and Tikoo, S. (2004). Conceptualizing and researching employer branding. Career Development International, 9(5): 501–517.

    Article  Google Scholar 

  • Balabanis, G., Diamantopoulos, A., Mueller, R. D. and Melewar, T. C. (2001). The impact of nationalism, patriotism and internationalism on consumer ethnocentric tendencies. Journal of International Business Studies, 32(1): 157–175.

    Article  Google Scholar 

  • Banalieva, E. R. and Sarathy, R. (2010). The impact of regional trade agreements on the global orientation of emerging market multinationals. Management International Review, 50(6): 797–826.

    Article  Google Scholar 

  • Bangara, A., Freeman, S. and Schroder, W. (2012). Legitimacy and accelerated internationalisation: An Indian perspective. Journal of World Business, 47(4): 623–634.

    Article  Google Scholar 

  • Barnard, H. (2010). Overcoming the liability of foreignness without strong firm capabilities — the value of market-based resources. Journal of International Management, 16(2): 165–176.

    Article  Google Scholar 

  • Ben-Zeev, T., Fein, S. and Inzlicht, M. (2005). Arousal and stereotype threat. Journal of Experimental Social Psychology, 41(2): 174–181.

    Article  Google Scholar 

  • Berning, S. C. and Holtbrügge, D. (2012). Chinese outward foreign direct investment — a challenge for traditional internationalization theories? Journal für Betriebswirtschaft, 62(3–4): 169–224.

    Article  Google Scholar 

  • Berthon, P., Ewing, M. and Hah, L. L. (2005). Captivating company: Dimensions of attractiveness in employer branding. International Journal of Advertising, 24(2): 151–172.

    Google Scholar 

  • Brannen, M. Y. (2004). When Mickey loses face: Recontextualization, semantic fit, and the semiotics of foreignness. The Academy of Management Review, 29(4): 593.

    Google Scholar 

  • Brouthers, L. E., Donnell, E. O. and Hadjimarcou, J. (2005). Generic product strategies for emerging market exports into triad nation markets: A mimetic isomorphism approach. Journal of Management Studies, 42(1): 225–245.

    Article  Google Scholar 

  • Buckley, P. J., Clegg, L. J., Cross, A. R., Liu, X., Voss, H. and Zheng, P. (2007). The determinants of Chinese outward foreign direct investment. Journal of International Business Studies, 38(4): 499–518.

    Article  Google Scholar 

  • Calhoun, M. (2002). Unpacking liability of foreignness: Identifying culturally driven external and internal sources of liability for the foreign subsidiary. Journal of International Management, 8(3): 301–321.

    Article  Google Scholar 

  • Cayla, J. and Eckhardt, G. M. (2007). Asian brands without borders: Regional opportunities and challenges. International Marketing Review, 24(4): 444–456.

    Article  Google Scholar 

  • Chang, Y. Y., Mellahi, K. and Wilkinson, A. (2009). Control of subsidiaries of MNCs from emerging economies in developed countries: The case of Taiwanese MNCs in the UK. The International Journal of Human Resource Management, 20(1): 75–95.

    Article  Google Scholar 

  • Chen, H., Griffith, D. A. and Hu, M. Y. (2006). The influence of liability of foreignness on market entry strategies: An illustration of market entry in China. International Marketing Review, 23(6): 636–649.

    Article  Google Scholar 

  • Child, J. and Rodrigues, S. B. (2005). The internationalization of Chinese firms: A case for theoretical extension? Management and Organization Review, 1(3): 381–410.

    Article  Google Scholar 

  • Chittoor, R. and Ray, S. (2007). Internationalization paths of Indian pharmaceutical firms — A strategic group analysis. Journal of International Management, 13(3): 338–355.

    Article  Google Scholar 

  • Clarkson, M. B. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. The Academy of Management Review, 20(1): 92–117.

    Google Scholar 

  • Cuervo-Cazurra, A. and Genc, M. (2008). Transforming disadvantages into advantages: Developing-country MNEs in the least developed countries. Journal of International Business Studies, 39(6): 957–979.

    Article  Google Scholar 

  • Cui, L. and Jiang, F. (2012). State ownership effect on firms’ FDI ownership decisions under institutional pressure: A study of Chinese outward-investing firms. Journal of International Business Studies, 43(3): 264–284.

    Article  Google Scholar 

  • Delios, A. and Beamish, P. W. (2001). Survival and profitability: The roles of experience and intangible assets in foreign subsidiary performance. Academy of Management Journal, 44(5): 1028–1038.

    Article  Google Scholar 

  • Demirbag, M., Sahadev, S. and Mellahi, K. (2010). Country image and consumer preference for emerging economy products: The moderating role of consumer materialism. International Marketing Review, 27(2): 164–178.

    Google Scholar 

  • Denk, N., Kaufmann, L. and Roesch, J.-F. (2012). Liabilities of foreignness revisited: A review of contemporary studies and recommendations for future research. Journal of International Management, 18(4): 322–334.

    Article  Google Scholar 

  • DiMaggio, P. J. and Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2): 147–160.

    Article  Google Scholar 

  • Dunning, J. H., Kim, C. and Park, D. (2008). Old wine in new bottles: A comparison of emerging market TNCs today and developed country TNCs thirty years ago, SLPTMD Working Paper Series 11, Department of International Economics, Oxford: University of Oxford.

    Google Scholar 

  • Eden, L. and Miller, S. R. (2004). Distance matters: Liability of foreignness, institutional distance and ownership strategy. Advances in International Management, 16: 187–221.

    Article  Google Scholar 

  • Elango, B. (2009). Minimizing effects of “liability of foreignness”: Response strategies of foreign firms in the United States. Journal of World Business, 44(1): 51–62.

    Article  Google Scholar 

  • Elango, B. and Pattnaik, C. (2007). Building capabilities for international operations through networks: A study of Indian firms. Journal of International Business Studies, 38(4): 541–555.

    Article  Google Scholar 

  • Enderwick, P. (2009). Large emerging markets (LEMs) and international strategy. International Marketing Review, 26(1): 7–16.

    Article  Google Scholar 

  • Estrin, S., Baghdasaryan, D. and Meyer, K. E. (2009). The impact of institutional and human resource distance on international entry strategies. Journal of Management Studies, 46(7): 1171–1196.

    Article  Google Scholar 

  • Ferner, A., Almond, P. and Colling, T. (2005). Institutional theory and the cross-national transfer of employment policy: The case of workforce diversity in US multinationals. Journal of International Business Studies, 36(3): 304–321.

    Article  Google Scholar 

  • Fombrun, C. and Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2): 233–258.

    Article  Google Scholar 

  • Fortune. (2013). Fortune Global 500 List. CNN Money. Retrieved from http://money.cnn.com/magazines/fortune/global500/2013/full_list/. Accessed on 16 February 2014.

  • Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Marshfield: Pitman.

    Google Scholar 

  • Galbraith, A. (2012). China’s Sany vows no lay offs in Germany. Wall Street Journal. Retrieved from http://online.wsj.com/article/BT-CO-20120201-708285.html#, Accessed on 18 February 2014.

  • Gaur, A. and Lu, J. W. (2007). Ownership strategies and survival of foreign subsidiaries: Impacts of institutional distance and experience. Journal of Management, 33(1): 84–110.

    Article  Google Scholar 

  • Gaur, A. S., Delios, A. and Singh, K. (2007). Institutional environments, staffing strategies, and subsidiary performance. Journal of Management, 33(4): 611–636.

    Article  Google Scholar 

  • Geringer, J. M. and Beamish, P. W. (1989). Diversification strategy and internationalization: Implications for MNE performance. Strategic Management Journal, 10(2): 109–119.

    Article  Google Scholar 

  • Globerman, S. and Shapiro, D. (2008). Economic and strategic considerations surrounding Chinese FDI in the United States. Asia Pacific Journal of Management, 26(1): 163–183.

    Article  Google Scholar 

  • Goldstein, A. (2009). Multinational companies from emerging economies: Composition, conceptualization and direction in the global economy. The Indian Journal of Industrial Relations, 45(1): 137–148.

    Google Scholar 

  • Goodall, K. and Roberts, J. (2003). Only connect: Teamwork in the multinational. Journal of World Business, 38(2): 150–164.

    Article  Google Scholar 

  • Greenwald, A. G. and Banaji, M. (1995). Implicit social cognition: Attitudes, self-esteem, and stereotypes. Psychological Review, 102(1): 4–27.

    Article  Google Scholar 

  • Guillén, M. F. and Garc Canal, E. (2009). The American model of the multinational firm and the “new” multinationals from emerging economies. Academy of Management Perspectives, 23(2): 23–36.

    Article  Google Scholar 

  • Guillén, M. F. and Garc Canal, E. (2011). The rise of emerging market multinationals. IESE Insight, Third Quarter, (10): 13–19.

    Article  Google Scholar 

  • Han, C. M. (1989). Country image: Halo or summary construct? Journal of Marketing Research, 26(2): 222–229.

    Article  Google Scholar 

  • Hennart, J.-F. (2012). Emerging market multinationals and the theory of the multinational enterprise. Global Strategy Journal, 2(3): 168–187.

    Article  Google Scholar 

  • Hennart, J.-F., Roehl, T. and Zeng, M. (2002). Do exits proxy a liability of foreignness? The case of Japanese exits from the US. Journal of International Management, 8(3): 241–264.

    Article  Google Scholar 

  • Hitt, M. A., Levitas, E., Arregle, J.-L. and Borza, A. (2000). Partner selection in emerging and developed market contexts: Resource-based and organizational learning perspectives. Academy of Management Journal, 43(3): 449–467.

    Article  Google Scholar 

  • Holtbrügge, D. and Kreppel, H. (2012). Determinants of outward foreign direct investment from BRIC countries: An explorative study. International Journal of Emerging Markets, 7(1): 4–30.

    Article  Google Scholar 

  • Hoskisson, R. E., Eden, L., Chung Ming, L. and Wright, M. (2000). Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267.

    Article  Google Scholar 

  • Hymer, S. (1976). The International Operations of National Firms: A Study of Direct Foreign Investment. Cambridge: MIT Press.

    Google Scholar 

  • Johanson, J. and Vahlne, J. (1977). The internationalization process of the firm — a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23–32.

    Article  Google Scholar 

  • Johansson, J. K., Ronkainen, I. A. and Czinkota, M. R. (1994). Negative country-of-origin effects: The case of New Russia. Journal of International Business Studies, 25(1): 157–176.

    Article  Google Scholar 

  • Kedia, B., Gaffney, N. and Clampit, J. (2012). EMNEs and knowledge-seeking FDI. Management International Review, 52(2): 155–173.

    Article  Google Scholar 

  • Kedron, P. and Bagchi-Sen, S. (2012). Foreign direct investment in Europe by multinational pharmaceutical companies from India. Journal of Economic Geography, 12(4): 809–839.

    Article  Google Scholar 

  • Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57(1): 1–12.

    Article  Google Scholar 

  • Klossek, A., Linke, B. M. and Nippa, M. (2012). Chinese enterprises in Germany: Establishment modes and strategies to mitigate the liability of foreignness. Journal of World Business, 47(1): 35–44.

    Article  Google Scholar 

  • Kostova, T. and Roth, K. (2002). Adoption of an organizational practice by subsidiaries of multinational corporations: Institutional and relational effects. Academy of Management Journal, 45(1): 215–233.

    Article  Google Scholar 

  • Kostova, T. and Zaheer, S. (1999). Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24(1): 64–81.

    Google Scholar 

  • Kreppel, H. and Holtbrügge, D. (2012). The perceived attractiveness of Chinese products by German consumers — a sociopsychological approach. Journal of Global Marketing, 25(2): 79–99.

    Article  Google Scholar 

  • Lievens, F., Decaesteker, C., Coetsier, P. and Geirnaert, J. (2001). Organizational attractiveness for prospective applicants: A person organisation fit perspective. Applied Psychology, 50(1): 30–51.

    Article  Google Scholar 

  • Liu, H. and Li, K. (2002). Strategic implications of emerging Chinese multinationals: The Haier case study. European Management Journal, 20(6): 699–706.

    Article  Google Scholar 

  • Luo, Y. and Mezias, J. M. (2002). Liabilities of foreignness: Concepts, constructs, and consequences. Journal of International Management, 8(3): 217–221.

    Article  Google Scholar 

  • Luo, Y. and Peng, M. W. (1999). Learning to compete in a transition economy: Experience, environment, and performance. Journal of International Business Studies, 30(2): 269–295.

    Article  Google Scholar 

  • Luo, Y. and Rui, H. (2009). An ambidexterity perspective toward multinational enterprises from emerging economies. Academy of Management Perspectives, 23(4): 49–71.

    Article  Google Scholar 

  • Luo, Y., Shenkar, O. and Nyaw, M. (2002). Mitigating liabilities of foreignness: Defensive versus offensive approaches. Journal of International Management, 8(3): 283–300.

    Article  Google Scholar 

  • Luo, Y. and Tung, R. L. (2007). International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38(4): 481–498.

    Article  Google Scholar 

  • Luo, Y., Xue, Q. and Han, B. (2010). How emerging market governments promote outward FDI: Experience from China. Journal of World Business, 45(1): 68–79.

    Article  Google Scholar 

  • Madhok, A. and Keyhani, M. (2012). Acquisitions as entrepreneurship: Asymmetries, opportunities, and the internationalization of multinationals from emerging economies. Global Strategy Journal, 2(1): 26–40.

    Article  Google Scholar 

  • Martin, I. M. and Eroglu, S. (1993). Measuring a multi-dimensional construct: Country image. Journal of Business Research, 28(3): 191–210.

    Article  Google Scholar 

  • Mathews, J. A. (2002). Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia Pacific Journal of Management, 19(4): 467–488.

    Article  Google Scholar 

  • Mathews, J. A. (2006). Dragon multinationals: New players in 21st century globalization. Asia Pacific Journal of Management, 23(1): 5–27.

    Article  Google Scholar 

  • McMahon, D. (2012). China’s Sany Group: U.S. Discriminates against China firms’ Investments. Wall Street Journal. Retrieved from http://online.wsj.com/news/articles/SB10000872396390444734804578064183506227980, Accessed on 19 February 2014.

  • Meyer, K. E., Estrin, S., Bhaumik, S. K. and Peng, M. W. (2009). Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal, 30(1): 61–80.

    Article  Google Scholar 

  • Mezias, J. M. (2002). How to identify liabilities of foreignness and assess their effects on multinational corporations. Journal of International Management, 8(3): 265–282.

    Article  Google Scholar 

  • Miller, S. R. and Parkhe, A. (2002). Is there a liability of foreignness in global banking? An empirical test of banks’ x-efficiency. Strategic Management Journal, 23(1): 55–75.

    Article  Google Scholar 

  • Miller, S. R., Thomas, D. E., Eden, L. and Hitt, M. (2009). Knee deep in the big muddy: The survival of emerging market firms in developed markets. Management International Review, 48(6): 645–666.

    Article  Google Scholar 

  • Moeller, M., Harvey, M., Griffith, D. and Richey, G. (2013). The impact of country-of-origin on the acceptance of foreign subsidiaries in host countries: An examination of the liability-of-foreignness. International Business Review, 22(1): 89–99.

    Article  Google Scholar 

  • Newburry, W., Gardberg, N. A. and Belkin, L. Y. (2006). Organizational attractiveness is in the eye of the beholder: The interaction of demographic characteristics with foreignness. Journal of International Business Studies, 37(5): 666–686.

    Google Scholar 

  • North, D. C. (1990). Institutions, Institutional Change, and Economic Performance. New York: Cambridge University Press.

    Book  Google Scholar 

  • Peng, M. W. (2003). Institutional transitions and strategic choices. The Academy of Management Review, 28(2): 275–296.

    Google Scholar 

  • Peng, M. W., Wang, D. Y. L. and Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5): 920–936.

    Article  Google Scholar 

  • Petersen, B. and Pedersen, T. (2002). Coping with liability of foreignness: Different learning engagements of entrant firms. Journal of International Management, 8(3): 339–350.

    Article  Google Scholar 

  • Podnar, K. and Jancic, Z. (2006). Towards a categorization of stakeholder groups: An empirical verification of a three-level model. Journal of Marketing Communications, 12(4): 297–308.

    Article  Google Scholar 

  • Pradhan, J. P. (2010). Strategic asset-seeking activities of Emerging Multinationals: Perspectives on foreign acquisitions by Indian pharmaceutical MNEs. Organizations and Markets in Emerging Economies, 1(2): 9–32.

    Google Scholar 

  • Puffer, S. M. and McCarthy, D. J. (2007). Can Russia’s state-managed, network capitalism be competitive? Journal of World Business, 42(1): 1–13.

    Article  Google Scholar 

  • Ramachandran, J. (2010). The liabilities of origin: An emerging economy perspective on the costs of doing business abroad. Advances in International Management: The Past, Present and Future of International Business and Management, 23: 231–265.

    Article  Google Scholar 

  • Rui, H. and Yip, G. S. (2008). Foreign acquisitions by Chinese firms: A strategic intent perspective. Journal of World Business, 43(2): 213–226.

    Article  Google Scholar 

  • Salehizadeh, M. (2007). Emerging Economies’ multinationals: Current status and future prospects. Third World Quarterly, 28(6): 1151–1166.

    Article  Google Scholar 

  • Sauvant, K. P., Maschek, W. A. and McAllister, G. (2009). Foreign direct investment from emerging markets: The challenges ahead. Paper presented at the OECD Global Forum on International Investment, 7–8 December 2009, Paris, France.

    Google Scholar 

  • Schmidt, T. and Sofka, W. (2009). Liability of foreignness as a barrier to knowledge spillovers: Lost in translation? Journal of International Management, 15(4): 460–474.

    Article  Google Scholar 

  • Scott, R. (1995). Institutions and Organizations. Thousand Oaks: Sage.

    Google Scholar 

  • Sethi, D. and Judge, W. (2009). Reappraising liabilities of foreignness within an integrated perspective of the costs and benefits of doing business abroad. International Business Review, 18(4): 404–416.

    Article  Google Scholar 

  • Shenkar, O. (2001). Cultural distance revisited: Towards a more rigorous conceptualization and measurement of cultural differences. Journal of International Business Studies, 32(3): 519–535.

    Article  Google Scholar 

  • Suchman, M. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3): 571–610.

    Google Scholar 

  • Thomas, D. E., Eden, L., Hitt, M. A. and Miller, S. R. (2007). Experience of emerging market firms: The role of cognitive bias in developed market entry and survival. Management International Review, 47(6): 845–867.

    Article  Google Scholar 

  • Transparency International. (2013). Transparency in Corporate Reporting: Assessing Emerging Market Multinationals, http://www.transparency.org/whatwedo/publication/transparency_in_corporate_reporting_assessing_emerging_market_multinational, Accessed on 17 February 2014.

  • Turban, D. B., Lau, C.-M., Ngo, H.-Y., Chow, I.H.S. and Si, S.X. (2001). Organizational attractiveness of firms in the People’s Republic of China: A person-organization fit perspective. Journal of Applied Psychology, 86(2): 94–206.

    Article  Google Scholar 

  • Wang, C., Hong, J., Kafouros, M. and Wright, M. (2012). Exploring the role of government involvement in outward FDI from emerging economies. Journal of International Business Studies, 43(7): 655–676.

    Article  Google Scholar 

  • Yamakawa, Y., Peng, M. W. and Deeds, D. L. (2008). What drives new ventures to internationalize from emerging to developed economies? Entrepreneurship Theory and Practice, 32(1): 59–83.

    Article  Google Scholar 

  • Yeoh, P.-L. (2011). Location choice and the internationalization sequence: Insights from Indian pharmaceutical companies. International Marketing Review, 28(3): 291–312.

    Article  Google Scholar 

  • Yildiz, H. E. and Fey, C. F. (2012). The liability of foreignness reconsidered: New insights from the alternative research context of transforming economies. International Business Review, 21(2): 269–280.

    Article  Google Scholar 

  • Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2): 341–363.

    Article  Google Scholar 

  • Zaheer, S. (2002). The liability of foreignness, redux: A commentary. Journal of International Management, 8(3): 351–358.

    Article  Google Scholar 

  • Zaheer, S. and Mosakowski, E. (1997). The dynamics of the liability of foreignness: A global study of survival in financial services. Strategic Management Journal, 18(6): 439–464.

    Article  Google Scholar 

Download references

Authors
  1. Katrin Held
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Nicola Berg
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Aalborg University, Denmark

    Marin Marinov

Copyright information

© 2015 Katrin Held and Nicola Berg

About this chapter

Cite this chapter

Held, K., Berg, N. (2015). Liability of Emergingness of Emerging Market Multinationals in Developed Markets: A Conceptual Approach. In: Marinov, M. (eds) Experiences of Emerging Economy Firms. Palgrave Macmillan, London. https://doi.org/10.1057/9781137472281_2

Download citation

Publish with us

Policies and ethics

Search

Navigation