Turning a liability into an asset of foreignness: Managing informal networks in Korea
Lee, J.; Paik, Y.; Horak, S., & Yang, I. (2022). Turning a liability into an
asset of foreignness: Managing informal networks in Korea. Business Horizons,
65(3), 351-364. DOI: 10.1016/j.bushor.2021.04.002,
Link:
https://doi.org/10.1016/j.bushor.2021.04.002
Abstract
Although foreignness can bring both benefits and costs, much of the literature
has focused on the liability of foreignness (LOF) while relatively little
attention has been paid to the positive side. Despite the presence of LOFs,
foreign companies may accrue some unique advantages from their foreign status,
which are referred to as assets of foreignness (AOFs). Drawing upon social
capital theory and institutional theory, this paper examines the issue of LOFs
versus AOFs in the context of the informal networks in Korea and explores how
foreign companies can manage their weaknesses in host country-specific informal
networks to create value from their foreignness. We discuss two practical
strategies, namely reactive and proactive strategies that can be used by foreign
companies. While these two strategies can be pursued in parallel, this paper
suggests that foreign companies should spend efforts and resources in pursuing
proactive strategies with priority. This paper contributes to a more nuanced
understanding of the role of foreignness in the international business context
and provides practical insights into how foreign companies can leverage their
foreign status in developing their own informal networks in Korea.
Keywords
Liability of foreignness, asset of foreignness, informal networks, social
capital, South Korea, yongo, inmaek, wasta, guanxi, strategic choice, proactive
strategy, reactive strategy.