Mechanism of overcoming liability of foreignness: organizational identity change—an exploratory case study of Lenovo and COSCO

DU Xiaojun1 YANG Bo1 QI Chaoshun1 XIAO Chenhao2

(1.School of Business Administration, Northeastern University, Shenyang, China 110169)
(2.Network Emulation Lab, DirecTV of AT&T, Los Angeles 90245, USA)

【Abstract】Overcoming the “liability of foreignness” (LOF) is the prerequisite for successful internationalization of transnational enterprises, while previous research has done insufficiently to guide transnational enterprises of emerging economies to overcome the disadvantage. This paper conducted an exploratory case study on Lenovo and China COSCO Shipping Corporation Limited (COSCO) and analyzed archival data and interview data. By the application of coding process of the grounded theory, the paper developed a theoretical model as a strategy to overcome LOF based on organizational identity change. The results indicate the following aspects. ① The LOF that Chinese transnational enterprises confront is mainly generated by the lack of legitimacy in organizational identity, namely, the organizational identities are misunderstood and misinterpreted by host country stakeholders, and thus not recognized and accepted. Identity misunderstanding is caused by identity ambiguity and identity misinterpreting is caused by the negative image of country-of-origin. ② Chinese transnational enterprises overcome LOF by organizational identity change, which includes “replacement” (replacing negative identity labels and meanings with real and positive ones), “evolution” (evolving and developing current identity) and “supplement” (creating new identity labels and meanings). ③ The purpose of organizational identity change is to promote stakeholders to form the real and positive cognition on “what the Chinese enterprises are” so as to eliminate identity misunderstanding and identity misinterpreting, and to obtain legitimacy of organizational identity.

【Keywords】 transnational enterprises; liability of foreignness; organizational identity change; legitimacy of organizational identity ;


【Funds】 Key Project of National Social Sciences Foundation of China (15AGL006)

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(Translated by ZHANG Yan)


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This Article


CN: 11-3536/F

Vol , No. 12, Pages 130-145

December 2015


Article Outline


  • 1 Introduction
  • 2 Research design
  • 3 Findings of the case study
  • 4 Case discussion
  • 5 Conclusions and enlightenment
  • References