Is there a liability of localness? How emerging market firms respond to regulatory punctuations
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.
Acquisition strategies, Banking, Emerging market firms, International diversification, Liability of foreignness, Liability of localness, Mexico, Multinational enterprises, Punctuated equilibrium, Regulatory punctuation
Perez-Batres, Luis A., and Lorraine Eden. "Is there a liability of localness? How emerging market firms respond to regulatory punctuations." Journal of International Management 14, no. 3 (2008): 232-251.
Journal of International Management