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Overcoming Liability of Foreignness: An Analysis of Early Foreign Investment in China

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  • Haiyang Chen

    (William Paterson University, USA)

  • Michael Y. Hu

    (Kent State University, USA)

  • G. Peter Zhang

    (Georgia State University, USA)

Abstract

This study examines the liability of foreignness (LOF) faced by multinational enterprises (MNEs), and the effects of strategies employed to overcome the liability. Based on a sample of 3,085 Sino-foreign joint ventures formed in manufacturing sectors in China, the authors find that Hong Kong investors, who are often perceived to have lower LOF than investors from other countries, are more actively engaged in strategies to overcome the LOF. Specifically, Hong Kong investors actively adopt strategies to seek local markets, maintain investment flexibility, utilize their competitive advantages in labor-intensive industries, and leverage cooperative synergism to improve their performance. Investors from other countries adopt market seeking and cooperative synergy approach to improve performance.

Suggested Citation

  • Haiyang Chen & Michael Y. Hu & G. Peter Zhang, 2010. "Overcoming Liability of Foreignness: An Analysis of Early Foreign Investment in China," International Journal of Strategic Decision Sciences (IJSDS), IGI Global, vol. 1(3), pages 71-83, July.
    • Handle: RePEc:igg:jsds00:v:1:y:2010:i:3:p:71-83
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