Regional Economic Stress as Moderator of Liability of Foreignness

In this paper we develop optimized localization strategies for multinational firms to overcome their liability of foreignness by adding a regional dimension within a country. We explore conceptually whether economic stress in a region has a mitigating or reinforcing effect. We test this analytical framework empirically on the highly internationalized German car market and find that intra-national regions under economic stress are more promising markets for foreign car manufacturers as the effects of liability of foreignness are significantly lower there.

Sofka, Wolfgang and Jörg Zimmermann (2008), Regional Economic Stress as Moderator of Liability of Foreignness, Journal of International Management 14 (2) , 155-172