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Overcoming the Liability of Foreignness in Internationalization in Emerging Economies: Lessons from Acquiring a Chinese Firm
Author(s) -
Wei Tian,
Clegg Jeremy
Publication year - 2014
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.21658
Subject(s) - liability , internationalization , multinational corporation , emerging markets , context (archaeology) , business , order (exchange) , industrial organization , international trade , accounting , finance , paleontology , biology
How foreign investors overcome the liability of foreignness has long been a topic for discussion in the study of inter nationalization. Whether MNCs rely on exploration or exploitation, especially in emerging economies, has not been adequately understood. Drawing on the theory of ownership advantage and local responsiveness, this study addresses the controversy in the literature by investigating the approaches to, and processes of, overcoming the liability of foreignness from a processual analysis. It reports on a case study of an American company's acquisition of a private Chinese firm. It concludes that exploration and exploitation are not merely simultaneous. Rather, these strategies are able to assimilate and deploy different categories of resources in order to build the basis for the exploitation of localization‐based resources in the later stage of integration. The findings of this study are not limited to emerging context but can be extended to any circumstance in which information deprivation exists. © 2014 Wiley Periodicals, Inc .