Running Head LIABILITY OF FOREIGNNESS AND ITS IMPACT ON SME

Liability Of Foreignness And Its Impact On Small And Medium Sized Enterprises

Table of Contents

Chapter 13

Introduction3

Chapter 211

Literature Review11

Chapter 320

Methodology20

Description and measurement of variables Dependent Variable23

Independent Variables25

Firm international experiential knowledge26

A firm local experiential knowledge27

Sequential Investment27

Control Variables28

Chapter 430

Empirical analysis and discussion30

3- Limitations on Previous Studies38

Performance comparison between firms with sequential investment and first-time investors45

Chapter 550

Conclusion50

References57

Appendix71

Liability of Foreignness and its Impact on Small and medium sized enterprises SME's

Chapter 1

Introduction

The success of international business firms depends on their ability to manage diverse cultural, institutional and competitive environments, to coordinate geographically dispersed resources, and to leverage innovations across national and regional borders. The ongoing globalization poses significant challenges to the upper echelons of organization due to the increase in complexity of the managerial decision-making environment. As a result, companies search for different ways to enhance the decision-making capacity at the firm upper echelons and internationalize their top management teams (TMT) as a source of knowledge and expertise about managing firm foreign operations. The importance of having top managers, who know and understand the logic and dynamics of firm foreign markets has been addressed for a long time among researchers and practitioners. Extensive experience from a particular country helps a manager to better understand the local market and institutions and to make sound managerial decisions. The difficulties faced by small and medium-sized enterprises (SMEs) which have invested in the Foriegn market in hopes of achieving the so-called global market there is an urgent need to conduct studies designed to improve the performance of small and medium-sized enterprises in world markets. difficulties for entering the Foriegn market can be researched from many standpoints. To this end, one of determinants that creates uncertainties and structural impediments for foreign investment enterprises operating within the Foriegn is the so-called liability of foreignness (Hymer, 1976; Zaheer, 1995). The liability of foreignness, which refers to the various costs creating structural complications in terms of foreign investment enterprises business activities within the relevant overseas market, has been known to decrease their investment performance by creating conditions which put these companies at a disadvantage vis- -vis domestic enterprises (Sethi and Guisinger, 2002). Viewed from the standpoint of small and medium-sized enterprises, which have less competence and experience than large-sized enterprises at their disposal, the lack of basic resources needed to manage the liability of foreignness greatly increases the likelihood of a negative influence on small and medium-sized enterprises This study highlights the presence of a liability of foreignness affecting Japanese companies that have invested in global markets.

This study analyzes the presence of a liability of foreignness involving the small and medium-scale manufacturing enterprises that have invested in Brazil and attempts to prove the relationship between the liability of foreignness and their investment performance. Foreign invested firms find themselves faced with peculiar business situations such as a local embedded business practices, laws and institutions, and ethical rules and values that differ from those found within their home countries. Due to such different environmental conditions, foreign investment ...