Session 142

Liability of Foreignness

Track G

Date: Monday, October 12, 2009


Time: 17:15 – 18:30

Common Ground

Room: Meeting Room 12

William Newburry, Florida International University

Title: An Offer You Cannot Refuse?: Organized Crime and Multinational Companies


  • Alvaro Cuervo-Cazurra, Northeastern University

Abstract: This paper studies how multinational companies (MNCs) deal with organized crime. Extending ideas from political economy into the analysis of organized crime, I argue that MNCs have an advantage over domestic firms in their dealings with organized crime because they have a credible ability to exit the country when organized crime becomes too predatory. As a result, they are less likely to suffer losses than domestic firms when paying protection money to organized crime. The results show that payments to organized crime increase the likelihood of suffering losses for domestic firms, but lower the likelihood for subsidiaries of foreign MNCs.

Title: Foreignness and Firm Reputation in Spain and Latin America


  • William Newburry, Florida International University
  • Abrahim Soleimani, Eastern Washington University

Abstract: We examine assessments of firm reputation in five Latin American countries and Spain, and how these assessments are influenced by foreignness characteristics of firms. In doing so, we refine existing theory regarding the effects of foreignness to account for differing foreignness perspectives in the developing and non-English speaking world. Analyses are based upon 115,980 individual evaluations of 109 companies operating in these countries, collected by the Reputation Institute in conjunction with The Foro de Reputacion Corporativa. Our results suggest that foreign-headquartered companies have lower reputations, while firms perceived to have a larger international scope are assessed higher. Moreover, we find that among foreign firms, firms from Spain have the strongest negative reputations in Latin America.

Title: Globalisation Frustrated? Revisiting the Case of Domestic Appliances


  • Chris Carr, University of Edinburgh
  • Ling Liu, University of Edinburgh

Abstract: Sceptics regarding global strategy stress the lack of integration of international markets, even in seemingly ‘global’ sectors such as domestic appliances (Baden Fuller and Stopford 1991). National players within Europe, outperformed those more internationally-orientated in the late 1980s. Equally sceptical Rugman classifies even Whirlpool as merely ‘Home Regional’. Ghemawat concedes some global concentration but advocates semi-global strategies. We revisit this sector to investigate whether these regional perspectives remain valid strategically. We analysed recent trends in global concentration, international strategies and performances and interviewed top players in Europe and China. Internationally aggressive new players from the emerging markets Korea and China, though still regional, had impacted on more global competition. Survivors from more advanced countries are increasingly global: national and even regional players have largely exited.

Title: Performance Decline and Strategic Change in International Markets


  • Jose Mata, Nova School of Business and Economics
  • Luis Filipe Lages, Nova University of Lisbon

Abstract: The authors use threat-rigidity and organizational learning theories to analyze firm reaction to performance change in foreign markets. Based on survey data from exporting firms, the findings indicate that firms are more likely to change their international strategy when performance declines. Specifically, in low competitive markets, firms tend to react to performance decline by adapting their strategy to the foreign market, whereas in more competitive markets, firms tend to react by standardizing their strategy. Thus, depending on competitive circumstances, both threat-rigidity and organizational learning theories may apply. These theories should be regarded as complements to each other, not as alternatives.

Title: The Advantage and Disadvantage of Foreignness


  • Alvaro Cuervo-Cazurra, Northeastern University

Abstract: The paper analyzes the impact of the advantage and disadvantage of foreignness on the operations of multinationals enterprises in a host country. The advantage (disadvantage) of foreignness is the benefit (liability) a firm encounters when its country of origin or foreign nature is liked (disliked) by individuals in a host country. These two concepts highlight the temporary nature of the advantage of the firm and how it varies across space and time. The same resource of the firm – its country of origin – can in some countries provide the firm with an advantage and in others a disadvantage. Moreover, in the same foreign country, the advantage of foreignness can become a disadvantage and vice versa as a result of events outside the control of the firm.

Title: The Two Faces of Foreign Investment: Firm Growth and Technological Competence


  • Kyoung-Gon Kim, Korea Institute for Defense Analyses
  • Chang-Yang Lee, KAIST Business School

Abstract: This study, for the first time, presents a comparison of the effects of FDI and FII on local firms’ growth rates, drawing on Korean manufacturing firm-level data between 2000 and 2004. Considering the characteristics of firms and industries, which has not been fully examined in the prior researches despite their fundamental importance, this paper endeavors to show that the effects of FDI and FII on firm growth highly vary with the firm- and industry-specific variables such as technological competence, group-affiliation, industry concentration, industrial appropriability and technological opportunity. The results of this study will (i) provide useful information to firms that have received or are eager to receive foreign investment and (ii) give some implications for business managers for setting up future strategies.

All Sessions in Track G...

Sun: 10:00 – 11:30
Session 270: Globalizing the Young Venture: A Conversation with Four High Tech CEOs
Sun: 13:00 – 14:30
Session 271: The Duke Offshoring Research Network Project: Implications for Research and Practice
Sun: 15:00 – 16:30
Session 272: Location, Knowledge, and Competitive Dynamics: New Research Directions
Sun: 16:30 – 17:30
Session 311: Global Strategy, IG Meeting
Mon: 12:45 – 14:00
Session 138: Doing Business in China
Mon: 15:45 – 17:00
Session 139: Offshoring & Outsourcing
Mon: 17:15 – 18:30
Session 142: Liability of Foreignness
Tue: 10:00 – 11:15
Session 140: Global Diversification and Firm Performance
Tue: 11:30 – 12:45
Session 145: Institutions and Governance in an Uncertain World
Tue: 14:30 – 15:45
Session 141: Entry Strategy & Location Choice
Session 143: Managing MNC Subsidiaries: Innovation, Control and Subsidiary Initiatives
Wed: 10:00 – 11:15
Session 146: Global Knowledge Search
Wed: 11:30 – 12:45
Session 147: Internationalizing the Firm: Institutions, Emerging Markets and Performance Considerations

Strategic Management Society

Washington DC