The path to overcoming the liability of foreignness using the eclectic paradigm: evidence from China

Abstract

Purpose

The purpose of this study is to examine different paths to overcoming the liability of foreignness. Based on the eclectic paradigm, the authors construct a theoretical framework comprising enterprise nature, location choice, entry mode and internationalization strategy.

Design/methodology/approach

The paper uses fuzzy-set qualitative comparative analysis (fsQCA) method to test the framework with data covering 120 multinational Chinese subsidiaries in 34 host in 2019.

Findings

The results show that liability of foreignness (LOF) is multiple concurrency, equifinality and asymmetry. When investing in Belt and Road (B&R) countries, non-SEOs can weaken LOF by applying the greenfield mode and resource-seeking strategy, other MNEs can implement a market- or resource-seeking strategy via cross-border M&A to reduce LOF. But when investing in non-B&R countries with a strategic asset-seeking strategy, the LOF is increased. The B&R initiative can reduce the LOF effectively.

Originality/value

The authors construct a general framework to explain the paths of overcoming LOF by bridging the OLI with LOF and introduce fsQCA method into the field of LOF to make up for the shortcoming of existing test method by explaining the influence of more than three factors on LOF.

Citation

Wang, N. and Sun, H. (2024), "The path to overcoming the liability of foreignness using the eclectic paradigm: evidence from China", Review of International Business and Strategy, Vol. 34 No. 5, pp. 678-691. https://doi.org/10.1108/RIBS-10-2023-0119