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Regional economic stress as moderator of liability of foreignness

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  • Sofka, Wolfgang
  • Zimmermann, Jörg

Abstract

In this paper we develop optimized localization strategies for multinational firms to overcome their liability of foreignness by adding a regional dimension within a country. We explore conceptually whether economic stress in a region has a mitigating or reinforcing effect. We test this analytical framework empirically on the highly internationalized German car market and find that intra-national regions under economic stress are more promising markets for foreign car manufacturers as the effects of liability of foreignness are significantly lower there.

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  • Sofka, Wolfgang & Zimmermann, Jörg, 2008. "Regional economic stress as moderator of liability of foreignness," Journal of International Management, Elsevier, vol. 14(2), pages 155-172, June.
    • Handle: RePEc:eee:intman:v:14:y:2008:i:2:p:155-172
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    Cited by:

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    2. Legler, Harald & Gehrke, Birgit & Krawczyk, Olaf & Schasse, Ulrich & Rammer, Christian & Leheyda, Nina & Sofka, Wolfgang, 2009. "Die Bedeutung der Automobilindustrie für die deutsche Volkswirtschaft im europäischen Kontext: Endbericht an das Bundesministerium für Wirtschaft und Technologie," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 110502.
    3. Jane W. Lu & Hao Ma & Xuanli Xie, 2022. "Foreignness research in international business: Major streams and future directions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 449-480, April.
    4. Schmidt, Tobias & Sofka, Wolfgang, 2009. "Liability of foreignness as a barrier to knowledge spillovers: Lost in translation?," Journal of International Management, Elsevier, vol. 15(4), pages 460-474, December.
    5. Xu, Kai & Hitt, Michael A. & Brock, David & Pisano, Vincenzo & Huang, Lulu S.R., 2021. "Country institutional environments and international strategy: A review and analysis of the research," Journal of International Management, Elsevier, vol. 27(1).
    6. Gu, Yiwen (Jenny) & Filatotchev, Igor & Greg Bell, R. & Rasheed, Abdul A., 2019. "Liability of foreignness in capital markets: Institutional distance and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 57(C), pages 142-160.

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