Liability of foreignness (LOF) refers to the difficulties and additional costs that multinational enterprises face when they operate in a foreign market. Rooted in institutional theory, extant literature has discussed isomorphism, transference, and sociopolitical activism as legitimation strategies to counteract LOF. This view relates to the macro level of firm and society, assumes passivity of subsidiaries, and neglects implementation of these strategies. Consequently, this paper aims at complementing this restrictive view through a qualitative study to explore how French multinational banks respond to LOF challenges in India, an adverse institutional environment typical of emerging markets but also unique due to strong economic nationalism and cultural traditions. As such, the present article contributes to the institutional research stream by (1) presenting an empirical investigation at the micro level of subsidiary organisational practices to operationalise legitimation strategies in managerial terms; (2) revealing rhetoric proactive strategies beyond the passive or reactive paths identified previously; and (3) discussing the internal implications of implementing legitimation strategies directed at external recipients within the intraorganisational network of multinational banks, using the resource-based view.

International business literature has historically been divided between scholars exploring the local obstacles foreign firms face (thereby overlooking foreign firms’ capacity to deploy advantages locally) and those examining the internationalisation of firm-specific advantages (thereby overlooking the peculiarities of the local context in which foreign firms deploy their advantages). We still do not completely understand the process by which multinational enterprises (MNEs) – especially service MNEs – develop competitive advantages in relation to the host environment. Using a multiple-case study of four multinational banking subsidiaries in India, this research aims to explore the variety of competitive advantages deployed by foreign multinational banks (MNBs) in a hostile, competitive environment: the Indian banking industry. This article’s main contribution is to bridge the gap between the obstacle-oriented internationalisation literature and the advantage-oriented literature through an exploration and comparison of a comprehensive set of locally relevant advantages deployed by the four MNBs studied. We introduce the concepts of global anchoring and local anchoring to make sense of the directionality of subsidiaries’ competitive advantages, and we explore their broad associations with subsidiaries’ commercial and financial performance. We conclude by discussing three theoretical lenses, situated at the intersection of the obstacle-oriented and advantage-oriented literatures, which can potentially account for the origins of competitive advantages in our sample, and we develop a series of propositions for future research.

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