Liability of foreignness represents the costs of doing business abroad that result in a competitive disadvantage vis-à-vis indigenous firms

Question

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The liability of foreignness refers to the disadvantages or costs that foreign firms face when doing business abroad compared to domestic firms. This can include cultural differences, legal barriers, language barriers, and other factors that make it more difficult for the foreign firm to operate effectively and compete with local firms. This can result in a competitive disadvantage for the foreign firm, which is known as the liability of foreignness.

Liability of Foreignness Represents the Costs of Doing Business Abroad