Chapter 10 Learning Objectives

After studying this chapter, you should be able to:

1. Understand how institutions and resources affect liability of foreignness

2. Match the quest for location-specific advantages with strategic goals (where to enter)

3. Compare and contrast first- and late-mover advantages (when to enter)

4. Follow the comprehensive model of foreign market entries (how to enter)

5. Participate in three leading debates on foreign market entries

6. Draw implications for action

LIABILITY OF FOREIGNNESS

the inherent disadvantage foreign firms experience in host countries because of their nonnative status differences in formal and informal institutions governing the rules of the game in different countries local firms are already well versed in these rules, but foreign firms have to learn the rules quickly foreign firms are often still discriminated against, sometimes formally and other times informally

WHERE TO ENTER?

location-specific advantages - favorable locations in certain countries may give firms operating there an advantageagglomeration - beyond geographic advantages, location-specific advantages also arise from the clustering of economic activities in certain locationsnatural resource seeking - resources are tied to particular foreign locationsinnovation seeking - firms target countries and regions renowned for generating world-class innovationsmarket seeking - firms go after countries that offer strong demand for their products and services

efficiency seeking - firms single out the most efficient locations featuring a combination of scale economies and low-cost factors

Global versus Regional GeographicDiversification

Despite the widely held belief (and frequently voiced criticism from antiglobalization activists) that MNEs are expanding “globally,” surprisingly, even among the largest Fortune Global 500 MNEs, few are truly “global”.

Should most MNEs further globalize?