Title

Is there a liability of localness? How emerging market firms respond to regulatory punctuations

Abstract

In the 1990s, emerging economies all over the world deregulated, privatized and liberalized their domestic markets. These regulatory punctuations caused radical institutional changes for emerging market firms (EMFs). We argue that, for EMFs, regulatory punctuations created a liability of localness, parallel to the liability of foreignness that firms face when they go abroad. Whereas liability of foreignness comes from the differences caused by changing one's geographic place from 'here' to 'there'; liability of localness comes from changing one's point in time from 'then' (pre-exogenous regulatory shock) to 'now' (post-exogenous regulatory shock). In both cases, firms incur additional costs, and the ones that survive are ones that best develop strategies for coping with "being in a strange land". We apply our arguments to the Mexican banking industry, which was privatized and liberalized in the 1990s. © 2008 Elsevier Inc. All rights reserved.

Document Type

Article

DOI

https://doi.org/10.1016/j.intman.2007.10.004

Keywords

Acquisition strategies, Banking, Emerging market firms, International diversification, Liability of foreignness, Liability of localness, Mexico, Multinational enterprises, Punctuated equilibrium, Regulatory punctuation

Publication Date

9-1-2008

Journal Title

Journal of International Management

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