Causes of the Difficulties in Internationalization

Abstract:     
We study the causes of the difficulties faced by firms when they internationalize in search of new markets. We build on the resource-based theory to argue that the difficulties in internationalization can be separated into three main sets based on their relationship to advantage: loss of an advantage of resources transferred abroad, creation of a disadvantage by resources transferred abroad, or lack of complementary resources required to operate abroad. In each set, we further distinguish difficulties that are specific to a firm from those that are common to a set of firms. We argue that only few of the resulting types of difficulties of internationalization are exclusive to the cross-border expansion, and propose solutions that address the root cause of each type.

Number of Pages in PDF File: 22

Keywords: cost of doing business abroad, liability of foreignness, internationalization, multinational enterprises, resource-based theory

JEL Classification: F23

Accepted Paper Series