The impact of liability of foreignness on performance in hybrid organizations

• Published in: Journal of international management Vol. 30; no. 2; p. 101133
• Main Authors: Sommeno, Tigist Woldetsadik, Mersland, Roy, Randøy, Trond
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.04.2024
• Subjects: Financial performance; Hybrid organization; Liability of foreignness; Microfinance; Social enterprise; Social performance; Liability of foreignness; Financial performance; Social enterprise; Hybrid organization; Microfinance; Social performance
• ISSN: 1075-4253; 1873-0620
• DOI: 10.1016/j.intman.2024.101133

This study extends the concept of liability of foreignness from for-profit firms to “hybrid” organizations that combine financial and social goals. By using a global dataset of 655 microfinance institutions (MFIs) observed in 77 countries between 1998 and 2015, we investigate the effect of foreignness on the financial and social performance of MFIs. The results suggest a negative effect of foreignness on the financial and social performance of hybrid organizations. Our results also suggest that the negative financial performance effect of foreignness is stronger in organizations with high social performance and in MFIs hosted in institutionally weaker countries. Furthermore, our results emphasize the moderating influence of scaling and longer tenure of MFIs in their host countries. Interestingly, our findings also shed light on the dual nature of scaling, demonstrating both its positive and negative moderating effects. By applying the concept of liability of foreignness this study enriches the understanding of performance in international hybrid organizations.