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The organizational theory of the multinational firm holds that foreignness is a liability, and specifically that lack of embeddedness in host-country social networks is a source of competitive disadvantage; meanwhile the literature on labor market discrimination suggests that exploiting the bigotry of others can be a source of competitive advantage. They seek to turn the former literature somewhat on its head by building on insights from the latter. Specifically, they argue that multinationals wield a particularly significant competitive weapon: as outsiders, they can identify social schisms in host labor markets and exploit them for their own competitive advantage.
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