Liability of foreignness and entry mode choice: Taiwanese firms in Europe

This paper examines the case of Taiwanese firms operating in Europe where linkages to local resources overcome the liability of foreignness. Taiwanese firms have chosen the wholly owned subsidiary (WOS) as the entry mode because the WOS is more effective in establishing and managing local relationships. Both intra-firm and inter-firm linkages are sought. While intra-firm linkages are useful in exploiting firm-specific capabilities, inter-firm linkages are useful in exploring new capabilities. The Taiwanese case demonstrates the importance of building local responsiveness and achieving vertical integration within the firm at the same time.