Definition: The 'liability of foreignness' is a term describing the additional costs that firms operating outside their home countries experience above those incurred by local firms. These costs originate in limited local knowledge, local stakeholders' discriminatory attitudes and the difficulties of managing organizations whose subunits are separated by time and distance.
Abstract: This entry presents a definition of the construct 'liability of foreignness' as a term that describes the costs associated with business activity in foreign countries. It presents major theoretical and methodological developments within this area, which include attempts to identify the sources of these liabilities, examination of the country, firm and time contingencies that determine their prevalence, as well as methodological approaches to the operation and measurement of this construct. The entry concludes with a discussion of recent extensions that conceptualize the consequences of foreignness more broadly, and identify circumstances whereby it is an asset rather than a liability.