The Pulse of Liability of Foreignness: Dynamic Legitimacy and Experience Effects in the German Car Market

Ulrich Kaiser () and Wolfgang Sofka

No 2007-01, CIE Discussion Papers from University of Copenhagen. Department of Economics. Centre for Industrial Economics

Abstract: Cultural and social borders can be stumbling blocks to internationalization (frequent errors, delays). We investigate the persistent roots of liability of foreignness and identify two major factors conceptually: a lack of host country legitimacy (demand side) and a lack of responsiveness on the side of the multinational corporation. Empirical testing for the German car market reveals an interaction between the two factors. For less experienced customer groups, we find that legitimacy is the dominant factor behind the effects of liability of foreignness. As customer experience increases, liability of foreignness caused by a lack of responsiveness becomes more of an issue.

Keywords: liability of foreignness; internationalization strategy; globalization (search for similar items in EconPapers)
JEL-codes: F23 L62 M10 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-06
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Working Paper: The pulse of liability of foreignness: dynamic legitimacy and experiences effects in the German car market (2006)
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