The liabilities of origin: an emerging economy perspective on the costs of doing business abroad

Abstract

We contend that the concept of liability of foreignness is inadequate to describe the set of disadvantages faced by emerging economy multinational enterprises (MNEs) in international markets. In order to address this theoretical gap, we develop the concept of “liabilities of origin” (LOR). We propose that the concept of LOR explains how the national origins of the MNE shape its disadvantages in international markets through three distinctive contexts of the MNE's ongoing activity: the home country context, the host country context, and the organizational context. We argue that in order to understand how emerging economy MNEs overcome their LOR, we need to engage simultaneously with the theoretical perspectives provided by the institutional entrepreneurship and organizational identity literatures. We suggest, further, that the concept of LOR may be useful to understand the character of MNE disadvantage in any international foray where the national origins of the MNE engender legitimacy-based and capability-based disadvantages for the MNE in a host country.

Citation

Ramachandran, J. and Pant, A. (2010), "The liabilities of origin: an emerging economy perspective on the costs of doing business abroad", Timothy, D., Torben, P. and Laszlo, T. (Ed.) The Past, Present and Future of International Business & Management (Advances in International Management, Vol. 23), Emerald Group Publishing Limited, Leeds, pp. 231-265. https://doi.org/10.1108/S1571-5027(2010)00000230017