Liability of foreignness and the constitutive legitimation of foreign firms in a host country

Yuping Zeng, Dean Xu

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

We examine population density effects on foreign firms’ likelihood to exit from a host country. The lack of constitutive legitimacy is an important aspect of the liability of foreignness experienced by foreign firms. Both foreign firms from a focal firm's home country and foreign firms from other countries can provide constitutive legitimation for the focal firm. These intrapopulation and interpopulation legitimation effects strengthen with a greater psychic distance between the home and host countries; they also interact with and strengthen each other. Results based on a dataset containing 68,723 firm-year observations on 29,843 foreign firms in China support our predictions.

Original languageEnglish
Article number101111
Number of pages13
JournalJournal of World Business
Volume55
Issue number5
DOIs
Publication statusPublished - Aug 2020

Keywords

  • Constitutive legitimation
  • density dependence
  • liability of foreignness
  • organizational ecology
  • psychic distance

Cite this