Liability of emergingness

Definition

Liability of emergingness refers to the challenges and disadvantages that firms from emerging markets face when competing on a global scale. These companies often struggle with perceptions of lower credibility, lack of experience, and limited resources compared to established firms from developed markets. This can hinder their ability to secure partnerships, attract talent, and access financing, ultimately impacting their global competitiveness.

5 Must Know Facts For Your Next Test

1. Emerging market firms may face skepticism from global investors and partners due to preconceived notions about their capabilities and stability.
2. The liability of emergingness can limit access to advanced technologies and expertise that are crucial for scaling operations internationally.
3. Cultural differences and unfamiliarity with foreign markets can exacerbate the challenges faced by these firms when trying to enter new regions.
4. Many emerging market firms need to invest heavily in building reputation and credibility to overcome the stigma associated with being from a developing country.
5. Strategic alliances and partnerships with established firms can help emerging market multinationals mitigate the liability of emergingness by leveraging shared resources and networks.

Review Questions

• How does the liability of emergingness affect the competitive strategies of firms from emerging markets?
  • The liability of emergingness forces firms from emerging markets to adopt unique competitive strategies that address their challenges. These companies may focus on building strong brand reputations through targeted marketing efforts or seek partnerships with established firms to enhance credibility. Additionally, they might invest in localized knowledge and tailor their products or services to better fit foreign markets, helping them overcome barriers related to perception and competition.
• Discuss the role of institutional voids in shaping the experience of emerging market multinationals in the global arena.
  • Institutional voids significantly impact the experiences of emerging market multinationals as they navigate the global landscape. The absence of reliable legal systems, regulatory frameworks, or efficient financial markets can create uncertainty and increase operational risks for these firms. As a result, they often need to develop innovative approaches to business practices and find alternative mechanisms for securing resources, which can be both a challenge and an opportunity for growth.
• Evaluate how emerging market firms can leverage their unique position to turn the liability of emergingness into a competitive advantage on a global scale.
  • Emerging market firms can transform the liability of emergingness into a competitive advantage by emphasizing their unique strengths, such as agility, adaptability, and cost-efficiency. By leveraging local insights and responding quickly to market changes, these firms can cater effectively to niche markets or underserved customer segments. Additionally, they can harness innovative technologies and solutions developed in response to local challenges, positioning themselves as disruptors in the global marketplace while also attracting attention for their fresh perspectives.

Related terms

Emerging Markets: Countries that are in the process of rapid growth and industrialization, typically characterized by lower income levels and less mature financial markets.

Institutional Voids: Situations in emerging markets where there is a lack of established institutions such as legal systems or regulatory frameworks, which complicates business operations.

Global Competitiveness: The ability of a firm or nation to compete effectively in the international market, often influenced by innovation, resource availability, and strategic positioning.