The Pulse of Liability of Foreignness: Dynamic Legitimacy and Experience Effects in the German Car Market
31 Pages Posted: 31 Oct 2006 Last revised: 26 Aug 2008
Date Written: October 2006
Abstract
Globalization has provided many companies with new opportunities for growth and efficiency. This requires them to operate successfully across cultural and social borders. These can be stumbling blocks to internationalization and have been found to cause frequent errors and delays for multinational companies. Such liabilities of foreignness are persistent in nature. We investigate the causes behind these detrimental effects. We identify two major factors conceptually: a lack of legitimacy in the host country on the demand side and a lack of responsiveness on the side of the multinational corporation. We test these hypotheses empirically using a comprehensive sample of the German car market, which is especially suitable due to its established domestic producers and international competitors. Our results suggest that the two factors interact. For less experienced customer groups, we find that legitimacy is the dominant factor behind the effects of liability of foreignness. As customer experience increases, liability of foreignness caused by a lack of responsiveness becomes more of an issue.
Keywords: Liability of foreignness, internationalization strategy, globalization
JEL Classification: F23, L62, M10
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Innovation Activities Abroad and the Effects of Liability of Foreignness: Where it Hurts
-
Determinants of the Locus of Global E-Commerce
By Nir Kshetri
-
By Wolfgang Sofka and Jörg Zimmermann
-
Determinants of the Global Diffusion of B2b E-Commerce
By Nir Kshetri and Nikhilesh Dholakia
-
By Tobias Schmidt and Wolfgang Sofka
-
Diffusion Pattern of Linux: An Assessment on Major Technology Dimensions
By Nir Kshetri
-
Internationalizing R&D Co-Opetition: Dress for the Dance with the Devil
By Anja Schmiele and Wolfgang Sofka
-
Regional Dimensions of Liability of Foreignness: Between a Rock and a Hard Place?
By Wolfgang Sofka and Jörg Zimmermann