The Liability of Foreignness Concept Definition

The Liability of Foreignness Concept
The Liability of Foreignness Concept

Want help to write your Essay or Assignments? Click here

The Liability of Foreignness Concept Definition

Liability of foreignness is the total of costs, which comprises of the unseen costs associated with the engagement with new legislatures and cultures when doing business abroad unlike home.

How the LOF affects the balance between the costs and benefits of international diversification

Elango (2009) asserts in his definition of LOF that it results in a disadvantageous competition for any multinational company. Generally, according to Elango, the costs incurred by an enterprise abroad would not be incurred by a similar local company. The genesis of such costs could be cultural, geographical, economic and institutional distances that lead to an increment in costs and makes it hard to succeed abroad. LOF majors on the social expenditures of transactions overseas.

Such costs are gotten from the relational, unfamiliarity and discrimination challenges faced by the foreign companies, unlike their domestic counterparts. They are innately uncertain and may be incurred even in future. Unfamiliarity costs are a reflection of poor experience or knowledge in the foreign country hence a setback to the foreign companies as likened to the local enterprises. There is a tendency for the foreign investors to pay handsomely for what the locals acquire cheaply or at zero cost.

Want help to write your Essay or Assignments? Click here

For instance, local banks in Germany are likely to have a sigh of relief if the Bundesbank lowers the interest rates in a day’s time but British-based banks in the country may have nothing to celebrate. Such an LOF is related to the durability of its existence in the host nation. Short-term resolutions in the foreign country result to unexpected challenges that are covered in the additional costs incurred by the multinational company to realize a similar level of host-market awareness as the domestic company.

Unfamiliarity hazards result to a rise in the average cost of the foreign company, but the production level remains constant. Such building market awareness costs should be gotten rid of with time, although they may persist if the multinational corporation managers continue adhering to the global strategy and fail to involve themselves in the civic learning (Barnard, 2010).

References

Barnard, H., 2010. Overcoming the liability of foreignness without strong firm capabilities—the value of market-based resources. Journal of International Management, 16(2), pp.165-176.

Elango, B., 2009. Minimizing effects of ‘liability of foreignness’: Response strategies of foreign firms in the United States. Journal of World Business, 44(1), pp.51-62.

Want help to write your Essay or Assignments? Click here

Author: admin

This is author biographical info, that can be used to tell more about you, your iterests, background and experience. You can change it on Admin > Users > Your Profile > Biographical Info page."

Unlike most other websites we deliver what we promise;

  • Our Support Staff are online 24/7
  • Our Writers are available 24/7
  • Most Urgent order is delivered with 6 Hrs
  • 100% Original Assignment Plagiarism report can be sent to you upon request.

GET 15 % DISCOUNT TODAY use the discount code PAPER15 at the order form.

Type of paper Academic level Subject area
Number of pages Paper urgency Cost per page:
 Total: