What is Liability of Foreignness

This chapter analyses the differentiation strategies of Chinese Multinational Corporations (MNCs) in Latin American (LA) emerging economies. This requires an institutional theory approach (i.e., how the institutional environment in the domestic market shapes the strategies pursued in the host country). The premise is that there is a positive relationship between the home institutional environment and the policies followed in foreign investments. It does this through a qualitative analysis of data collected in in-depth interviews from a theoretical sample of six Chinese MNCs operating in LA. The analysis focuses on three main areas, the informal institutions, the domestic institutional environment as a barrier and/or facilitator, and the strategies in different institutional frameworks. The results show that China's firms in LA are at an early stage in their international marketing and expansion strategies. These companies are leveraging their price competitiveness (based mainly on low cost manufacture at home) on the differentiation and/or market strengths of local partners with whom they have developed networks of Joint Ventures (JVs) in the region. This is also the consequence of a short international experience that has resulted in weak cross-cultural awareness. In addition, at this stage these companies are mainly looking to have better access to the customers in the host market and as such are creating ad-hoc structures in each of the countries where they operate without a clear differentiation strategy. These findings are similar to those in previous works on Chinese MNCs in developed economies.