Exploiting the liability of foreignness: why do service firms exploit foreign affiliate networks at home?

Abstract

Drawing on both a resource-based view of the firm and an in-depth case study, we develop a novel conceptual model that explains under what conditions a service firm may use its international affiliate network to build a differentiation-based competitive advantage in its domestic market. The bank we studied implemented a differentiation strategy by positioning itself as a "South American Bank" and by offering a set of foreign trade services to its domestic clients that were unique at the time of their introduction. Our conceptual model fills a gap in the literature on difficulties in internationalization by explaining under what conditions internationalizing firms may opt for a strategy that seeks to domestically exploit resources and capabilities that have been developed in the course of internationalization. © 2010 Elsevier Inc.