While foreignness has traditionally been viewed as a liability, recent scholarship increasingly argues that it can also serve as a potential asset. Drawing on research on locational dependencies, this study explores the host-country institutional context as a driver of the asset of foreignness, emphasizing how heterogeneity in foreign dependencies across host locations shapes the advantages that foreign firms can derive. Using a unique sample of intellectual property (IP) lawsuits in Chinese courts, we find that, in general, firms with higher levels of foreign ownership are more likely to win IP lawsuits. We elucidate the underlying mechanism by showing that the effects of the asset of foreignness are amplified when host markets are more economically and technologically dependent on foreign investment. Our additional analyses further suggest the coexistence of the liability and asset of foreignness, indicating that not all firms benefit equally from foreignness. This study advances research on international business and locational dependencies by highlighting the context-contingent nature of foreignness.
Chen et al. (Thu,) studied this question.