Introduction to Part II: Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness?

As the chapters in this volume emphasize, the access to local resources in a given host country is not a free-for-all. Although the LOF has traditionally been understood as a phenomenon related to firms' performance in local markets, implicitly evoking a market-seeking motivation for entry, it applies equally well to strategic asset seeking ( Dunning, 1993 ). Hence, foreign firms might suffer from discrimination and uncertainty relative to incumbent firms also in their attempts to get access to local resources such as labor and knowledge. The first chapter in this second section, by Nachum (‘Home-based Advantages and a Hierarchy of Location Resources: Foreign and Local Firms Dependency on Location Resources’), demonstrates these points and estimates a hierarchy of resources that differ in their degree of accessibility to foreign firms and fungibility within internal MNE networks. If the LOF thus inhibits MNEs' attempts to use LSA as a source of local competitiveness, we might assume a relationship of the form LSA M = LSA0(1 − e LOF), where e 0 captures, for lack of a better term, the local ‘resource embeddedness’, i.e. the extent to which local incumbents have an unfair advantage in sourcing LSA. These local firms, in contrast, do not suffer a penalty like the MNEs do and can freely access the local resources, so that LSA L = LSA0.