Firms competing in national contexts other than their own suffer from “the liability of foreignness” (Zaheer, 1995). This liability stems from their lack of in-depth knowledge relating to economic, cultural, social, and political factors that influence the operating environment in these countries. Without such knowledge, firms will incur greater risks than local firms who have detailed understanding of these factors, or other firms with more experience in such environments, thereby putting them at a competitive disadvantage. To compensate, firms expanding internationally need to develop, leverage, and deploy capabilities that provide them with advantages unavailable to their local competitors. For this reason, national context has been the foundation on which past theoretical treatments of the MNE rested, greatly influencing the formulation of international strategy.
Makhija, M. and Shenkar, O. (2004), "NATIONAL CONTEXT AND THE METANATIONAL PERSPECTIVE IN INTERNATIONAL STRATEGY", Hitt, M.A. and Cheng, J.L.C. (Ed.) "Theories of the Multinational Enterprise: Diversity, Complexity and Relevance" (Advances in International Management, Vol. 16), Emerald Group Publishing Limited, Bingley, pp. 67-82. https://doi.org/10.1016/S0747-7929(04)16005-8
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