transportation, multinational enterprises control and coordination the cost at a great distance and time zone.
2. cost was bring from the local environment due to lack of foundation and experience. For example, the assessment of risks and higher costs of corporate learning.
3. lack the perceived legitimacy and higher cost of reputation in host country. 4. domestic cost of constraints, such as some developed country limit thr export of their domestic high-tech product in some special country.
ii. some men think that the main cost of LOF MNCs is the time cost that they enter the overseas markets. What is you ideal about the time cost of LOF? 1. The cost of LOF is fixed and take place at the beginning.
2. The cost is variable and it will becoming less as the time lapse.
Hymer(1976) think the LOF is the time cost and it is variable when a company into a new market.
Zaheer and Mosakowskif (1997) think the cost of LOF will decreased at the first two years, and it will continued less than 16 years.
Lu and Beamish (2001) studies show that direct investment activities of enterprises between their performance at the began is negatively correlated and as the LOF reduce the performance improves. So LOF will declined with the MNEs are familiar with the acquisition of information on local environment.
3. the cost is persistent, it will always existed with the time lapse.
iii. what is the main source of LOF?
First, environment. With the development of globalization the international environment of competition become more complex and uncertainty, it make MNEs not perfect forecast about the glob environment.
Second, the own characteristic of MNEs. Unlikely the local company
multinational enterprises have lots of differentiations such as huge organization system, complex management structure and strategic fit, there are all increase the challenges of MNEs compared with local companies.
Third, the different between home country and host country. MNEs have a business on unfamiliar marketing environment, it will produce economic and social cost because of different institutional system, legal and culture. People usually think that the corporate from developing country face more LOFs than corporate from developed country, and they will spend most cost to overcome the LOFs.
iv.Miller and Richards have a study show that institutional distance of home country and host country are the main power which cause the LOF, so how to choose the host country? 1. physical distance
2. legal system (local enterprise law) 3. culture
4. policy and regulation
5. free market or planned market 6. …
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