The study identifies and analyzes the role of liability of foreignness (LOF) in the failure of immigrant owned new ventures. Building on literatures of immigrant entrepreneurship and LOF, we analyze the failure of 11 immigrant owned new ventures in Finland. In our multiple case study analysis, we find that entrepreneurial firms founded by immigrant entrepreneurs experience LOF due to foreign origins of their founders. We explore and elaborate the concept of LOF at individual level and discuss five sources including unfamiliarity with the local environment, lack of legitimacy and discrimination, constraints imposed by host country institutions, lack of cultural integration, and insufficient local language skills. Furthermore, we develop a process that outlines how extra challenges created by various sources of LOF lead to insufficient human, social, and financial capital that contributes to the operational failure and eventual closure of entrepreneurial firms founded by immigrants. The study contributes to literature on immigrant entrepreneurship, LOF, and entrepreneurial failure. The key insight or take away of the study is the detailed elaboration of different sources of LOF at individual level and process through which it leads to business failure of immigrant owned new ventures based on working experiences of immigrant entrepreneurs. • Liability of foreignness could be applied at the individual level to immigrant entrepreneurs. • At the individual level, there are five sources of liability of foreignness that create additional challenges. • Liability of foreignness plays an instrumental role in the failure of immigrant owned new ventures. • The process of venture failure involves deficiency of human, social, and financial capital. • Resource deficiencies created by the liability of foreignness lead to operational failure and the eventual closure of immigrant owned new ventures.
Ilyas et al. (Thu,) studied this question.