Latest Seminars

Identifying a Fundamental Source of the Liability of Foreignness: Evidence from Lobbying Fees Charged to Foreign Firms

The concept of the liability of foreignness has been criticized in the literature for lacking (1) theoretical clarity, (2) precision about the liability’s duration and permanence, and (3) specificity about its real economic costs—all of which has motivated calls to address these perceived deficiencies. This study seeks to help address this call for further research by looking at the fees charged to foreign firms by U.S. lobbyists. We argue that lobbyists function as institutional gatekeepers, providing certification for their foreign clients, but charging them a premium, approximately 9.74% higher than U.S. firms holding all other control variables at their means, to compensate for the career and economic risk that representing foreign firms entails. We show that this fee premium is largest for foreign firms from more authoritarian countries–as high as 32%--because of the perceived illegitimacy of such firms in political arenas where legitimacy is at issue. The theory and the empirical results from this study therefore suggest that the liability of foreignness persists to a significant degree as a large certification premium targeted foremost at firms from countries with different political institutions that are perceived as illegitimate. We further show that this fee premium for illegitimacy is both economically large and long-lasting. Our study contributes to the understanding of the liability of foreignness, nonmarket strategy, and certification.

 

Speaker :
Prof. Jordan Siegel, University of Michigan
Venue :
via Zoom
Date :
23.04.2021
Time :
9:00am-10:30am