Ge6 - CHAPTER 8 REVIEW QUESTION ANSWERS 1 Describe two ways in which foreign firms suffer from liability of foreignness First there are numerous

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CHAPTER 8 REVIEW QUESTION ANSWERS 1. Describe two ways in which foreign firms suffer from liability of foreignness. First, there are numerous differences in formal and informal institutions governing the rules of the game in different countries. Second, although customers in this age of globalization supposedly no longer discriminate against foreign firms, the reality is that foreign firms are often still discriminated against, sometimes formally and other times informally. In government procurement, “buy national” is often required. 2. What does the institution-based view indicate about how a firm should deal with the liability of foreignness? What does the resource-based view suggest? The institution-based view suggests that firms need to undertake actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries. The resource-based view argues that foreign firms need to deploy overwhelming resources and capabilities so that, after offsetting the liability of foreignness, there is still some competitive advantage . 3. What are some of the location-specific advantages found in agglomeration, the clustering of economic activities in a concentrated area? Location-specific advantages: favorable locations in certain countries may give firms operating there some of the following advantages. Efficiency seeking firms often single out the most efficient locations featuring a combination of scale economies and low-cost factors. Innovation seeking firms target countries and regions renowned for generating world- class innovations. Market seeking firms go after countries that offer strong demand for their products and services. Natural resource seeking: certain resources are tied to particular foreign locations. 4. Describe four attributes that can be found in foreign locations and how these might relate to a firm’s strategic goals. Cultural distance: the difference between two cultures along some identifiable dimensions. Institutional distance: the extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries. Stage models: a school of thought that believes that firms will enter culturally similar countries during their first stage of internationalization and that they may gain more confidence to enter culturally distant countries in later stages.
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This note was uploaded on 01/28/2011 for the course GEB 3373 taught by Professor Crum during the Spring '10 term at University of Florida.

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Ge6 - CHAPTER 8 REVIEW QUESTION ANSWERS 1 Describe two ways in which foreign firms suffer from liability of foreignness First there are numerous

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