The advantage of foreignness
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2022-07-22
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en
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Internationalizing companies seem more common in the contemporary economy. However, these companies have to handle with a liability of foreignness, as mainstream research suggests. Newer investigations in this topic find that foreign companies would have an advantage of foreignness. The aim of this research is examining whether there is an advantage or liability of foreignness, and how subsidiary experience, institutional quality and country openness contribute in moderating these differences between domestic and foreign companies. By performing a panel data analysis in which firm-level and country-level variables are included, this research investigates the hypothesized relationships in a panel of 12,852 companies, divided over 69 countries in the period 2013-2019. The results suggest that there is a liability of foreignness. This the liability of foreignness becomes stronger when subsidiary experience increases. The liability of foreignness also becomes stronger when institutional quality increases, but the liability of foreignness becomes weaker when country openness increases. The robustness checks suggest that the WGI could not be appropriate as a measure of the institutional environment, as the indicators of economic freedom give more plausible outcomes.
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Faculteit der Managementwetenschappen