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Journal of International Management 8 (2002) 265 – 282

How to identify liabilities of foreignness and assess their effects on multinational corporations
John M. Mezias*
Department of Management, University of Miami, 414 R Jenkins Building, Coral Gables, FL 33124-9145, USA

Abstract This article examines the liabilities of foreignness construct and discusses key methodological and research design issues facing liability of foreignness researchers. After reviewing past studies and more recent liabilities of foreignness research, I discuss definitional issues related to this construct. I then present a two-part research framework designed to first help identify a specific liability of foreignness in a focal country, and then help identify factors that minimize the effects of that specific liabilities of foreignness. I also discuss multinational management issues at the corporation level that likely affect liabilities of foreignness experienced at the foreign subsidiary level. D 2002 Elsevier Science Inc. All rights reserved.
Keywords: Liability of foreignness; Foreign direct investment; Foreign subsidiaries; Multinational management

1. Introduction Most foreign direct investment (FDI) theories suggest that foreign subsidiaries are at a disadvantage relative to domestic firms with respect to several aspects of doing business in host countries. While this idea is not new, most FDI research has focused exclusively on only one implication of this problem: the sources and types of advantages, such as intangible assets, that allow foreign investors to compensate for liabilities of foreignness. Focusing exclusively on advantages ignores the disadvantages faced in the host country that also significantly affect performance. What is the nature of these disadvantages? What factors vary

* Tel.: +1-305-284-1073. E-mail address: jmezias@miami.edu (J.M. Mezias).

1075-4253/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved. PII: S 1 0 7 5 - 4 2...