Is “being foreign” a liability for mining companies? Locational liabilities and social conflict in Latin America

Do foreign mining firms face additional challenges and incur additional costs in host environments because of their nationality? This paper draws on the business literature on liability of foreignness (LOF), to examine whether foreign mining firms face a performance liability in comparison to locally-owned mining companies. In order to adapt this literature to the particular context of mining in developing countries, characterized by territorially-uneven costs of doing business abroad, and link it with stakeholder perceptions, we introduce the concept of “locational liabilities”. We show that foreign mining firms do experience a liability of foreignness associated with a higher likelihood of social conflict, than locally-owned firms, and that this effect can only be fully identified with the inclusion of locational liabilities that interact differentially with foreign and local firms. Furthermore, we demonstrate that these liabilities are not easily mitigated by corporate social responsibility practices, suggesting that foreign firms may have greater difficulty obtaining social licence to operate. The article uses an original database of 634 mining properties in five countries of Latin America, and a novel empirical methodology based on highly-localized property-level sources of data drawn in part from geographic information system (GIS) analysis.