Liability of Emergingness of Emerging Market Multinationals in Developed Markets: A Conceptual Approach

In foreign markets, multinational enterprises (MNEs) need to manage in host countries applying the given rules of the game (North, 1990). While some foreign companies successfully manage a new institutional environment, others are not able to gain legitimacy and have difficulties in overcoming their liability of foreignness (LOF). LOF can arise from different sources, such as geographic distance between home and host countries, the foreign company’s unfamiliarity with the host-country specifics or unfavorable treatments of host-country nationals (Hymer, 1976; Zaheer, 1995). It weakens a company’s competitive advantage in foreign markets and consequently needs to be mitigated (Luo and Mezias, 2002; Luo, Shenkar and Nyaw, 2002; Suchman, 1995).