The Impact of Proximity on Resistance to Foreign Ventures: The Cases of India and Japan

Abstract

Over the years, a body of literature has developed that consistently shows how the liability of foreignness affects MNCs' performance. Institutional distance − regulatory, normative and cognitive − between the incomer and insiders has been identified as the likely source of the highest cost in doing business abroad. In this article, we draw on the existing literature but take the opposite perspective, looking instead at how various dimensions of proximity between local players increase MNC distance and foster local resistance. The study investigates two contexts and cases, India and Japan, at the time of foreign retailer entry and analyses the interplay between local proximity and local resistance. The analysis presents four dimensions of proximity, namely spatial proximity, relational proximity, identity proximity and inter-organizational proximity, which present the stiffest challenges to foreign retail ventures entering markets as newcomers.

How local stakeholder stereotypes impact liability of foreignness and asset of foreignness

“…Aggressive CSR strategies can be perceived as gifts of good intentions for host markets and potentially warm local stakeholders to foreign firms (Yang & Rivers, 2009). Foreign firms with a low warmth stereotype should also embed themselves in the local social fabric by implementing strategies that allow them to integrate with their host communities (Baron & Capo, 2016; Stening & Zhang, 2016; Van Der Eng, 2017). Organizational approaches, such as proactively hiring local employees, generously partnering with local firms, and promptly paying government taxes and levies, can signal friendly intentions by foreign firms toward local stakeholders (Gao et al, 2018; Glaister et al, 2020; Ikegami, Maznevski, & Ota, 2017).…”