Seminar (Dept. of General Management)

Theme：Too Hard to Overcome? How Moat-building by Local Firms Increases the Liability of Outsidership for Foreign Firms

Speaker：Zhenzhen Xie (Associate Professor of School of Economics and Management, Tsinghua University)

Time：2021-05-07 08:30

Address：Room 706, Mingde Business Building

Language：Chinese/English

ABSTRACT:

The literature on liability of outsidership discovered foreign firms’ competitive disadvantages in host countries due to their weak and peripheral positions in local business networks, but largely overlooked the impact of local political networks, and the role of local firms in shaping foreign firms’ liability of outsidership in both types of networks. Based on five years of panel data covering 28,619 foreign firms in China, this empirical study shows that business networking spending by privately-owned enterprises (i.e. insiders of local business networks) and political networking spending by state-owned enterprises (i.e. insiders of local political networks) both dampens foreign firms’ financial performance, but through different mechanisms. The former is mediated with reduction in commitment to local business partnerships, while the latter is mediated with reduction in commitment to host location. The effectiveness of coping strategies such as foreign firms’ networking efforts and market capability building was also examined.