Mechanism Of Overcoming The Liability Of Foreignness:Organizational Identity Change And Sensegiving

Internationalization has become an important way for Chinese multinational enterprises(MNEs)to explore overseas market,secure strategic resources,and enhance global competitiveness.However,Chinese MNEs face severe challenges due to liability of foreignness(LOF)during the course of internationalization,among which the misunderstanding and discrimination from host country stakeholders to Chinese MNEs'organizational identity(namely the central,distinctive and enduring characteristics of the organization)come first.Notably,Chinese MNEs' organizational identity is often considered to be closely associated with some negative labels for a long time such as"low-quality products","government intervention" and "bad governance" when Chinese MNEs enter developed countries.Therefore Chinese MNEs are confronted with significant LOF due to lack of legitimacy that result from those negative labels.Then there comes the question:how can Chinese MNEs overcome LOF caused by organizational identity?However,the previous research is not sufficient to explain this question in that researchers explain LOF phenomenon based on environmental factors(like institutional distance)and neglect endogenous factors that can give birth to LOF.Therefore,the previous theories are not enough to explain how MNEs overcome LOF caused by organizational identity.To fill this theoretical gap,the paper illustrates the relationship between organizational identity and LOF by using organizational identity theory,and then explores how to overcome LOF through organizational identity change and sensegiving.After the literature review,8 Chinese MNEs are selected to conduct the exploratory multiple-case study according to the typical paradigm of "building theory from case study",and 3-stage coding process of grounded theory is adopted to analyze the case data.The research is as follows:(1)Illustrate the relationship between organizational identity and LOF,and then reveal the formation mechanism of LOF from the perspective of organizational identity.By using a multiple-case study method,we construct the formation mechanism model,and the result indicates the LOF that Chinese NEs face is mainly generated by organizational identity conflict and organizational identity ambiguity.On the one hand,the MNEs' organizational identity embedded in parent country doesn't conform to institutional environment of host country due to institutional difference,leading to the difficulty to get legitimacy in the new institutional environment.On the other hand,the host country stakeholders can't understand and recognize the INE's organizational identity on account of the ambiguity caused by information asymmetry.(2)Explore the dynamic mechanism of how MNEs overcome LOF by organizational identity change.Organizational identity change is a process for MNEs to redefine "who we are as an organization" in order to reduce organizational identity conflict and establish the legalized identity under host country institutional environment.The paper presents the specific patterns,mechanism and dynamic process of organizational identity change through literal replication and theoretical replication method.The result indicates that organizational identity change can be achieved through three patterns.First,label change,namely changing the definition of "who we are as an organization";second,meaning change,namely changing the meaning behind the label;third,identity salience change,namely reducing the salience of negative identity dimension and improve the positive one.Then we conclude the following four specific mechanisms of organizational identity change:replacement(replace negative label and meaning with positive ones),evolution(deepen and develop the present identity to make it more positive),supplement(create new label and meaning)and thicking(enrich and improve the meaning of the label).MNEs' organizational change is a continuous process and different mechanisms play complementary and sequential roles during this process.(3)Explore the dynamic mechanism of how MNEs overcome LOF by organizational identity sensegiving.Organizational identity sensegiving means that MNEs market the real or transformed identity to host country stakeholders,to help them form a correct and positive cognition about "who the MNEs are".Then we summarize the specific mechanism and dynamic process of organizational identity sensegiving through literal replication and theoretical replication method.The result shows that organizational identity sensegiving includes three iterative and complementary mechanisms.First,discourse mechanism,namely marketing the organizational identity by language,including identity framing,storytelling,media interviews and information disclosure;second,behaviour mechanism,namely expressing organizational identity through actual behaviours of the enterprise,including strategic marketing,business presentation and product promotion;third,signaling mechanism,namely releasing identity message and identity endorsement via some signaling activities,including corporate honor and authority certification.To conclude,organizational identity sensegiving is a combination of thicking and complementary process.The main innovation of this research is that we add a new theory perspective to analyze LOF phenomenon,namely the organizational identity perspective.On the one hand,we explain the formation mechanism of LOF from organizational identity perspective,opening the "black box" of formation process of LOF.On the other hand,we explore the dynamic process to overcome LOF from the perspective of organizational identity change and sensegiving,which provides new theoretical guidance for MNEs facing LOF.In practice,this research has practical implications for Chinese MNEs to conduct organizational identity change and sesnsegiving during internationalization.