From home country to home base: A dynamic approach to the liability of foreignness

Abstract

We argue that the influence of the home country wanes as the firm increases its geographic reach. We introduce the concept of the “home base” to capture the effect of the set of countries in which the firm operates. We expect the dynamic liability of foreignness defined relative to the home base to be a better predictor than the static liability of foreignness defined relative to the home country. We also expect the diversity of foreign experience to increase foreign market entry. We find support for these hypotheses with data on Chinese listed firms investing abroad between 1991 and 2007. Copyright © 2014 John Wiley & Sons, Ltd.