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Within-Firm Variation in the Liability of Foreignness: A Demand-Based Perspective

Benischke, Mirko; Rietveld, Gerben; Slangen, Arjen; (2022) Within-Firm Variation in the Liability of Foreignness: A Demand-Based Perspective. Journal of Management 10.1177/01492063221094261. (In press). Green open access

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Abstract

The literature on the liability of foreignness focuses on explaining why foreign firms operating in a given country underperform relative to their domestic rivals. We provide a complementary perspective that allows for within-firm variation in the liability of foreignness, at the level of a firm's products. Specifically, we explore how consumers’ willingness-to-pay for foreign products is affected by a firm's sourcing strategy for product inputs and by heterogeneity in demand characteristics across the markets where the product is sold. We hypothesize that sourcing inputs from a regional product developer as well as cultural diversity in regional consumer markets will have a stronger positive impact on the regional sales performance of products sold by foreign firms than on those by domestic firms. Our hypotheses are supported in a product-level analysis of 2,144 console video games sold in the 11 subnational regions of the United Kingdom over the period 2005–2008. Our findings suggest that firm-level explanations of the liability of foreignness need to be supplemented by a product-level perspective that considers heterogeneity in both supply- and demand-side factors as important determinants of consumers’ willingness-to-pay for foreign products.

Type: Article
Title: Within-Firm Variation in the Liability of Foreignness: A Demand-Based Perspective
Open access status: An open access version is available from UCL Discovery
DOI: 10.1177/01492063221094261
Publisher version: https://doi.org/10.1177/01492063221094261
Language: English
Additional information: This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access page (https://us.sagepub.com/en-us/nam/open-access-at-sage).
Keywords: Liability of foreignness, demand heterogeneity, product-market strategy, regional sourcing, cultural diversity
UCL classification: UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL
URI: https://discovery.ucl.ac.uk/id/eprint/10146013
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