What is a primary factor that increases a firm's liability of outsidership?

The concept of "liability of outsidership" refers to the disadvantages that firms face when they are operating in a foreign market where they lack the local knowledge, networks, and relationships that are crucial for success. The factor that significantly increases this liability is the distance and differences from the host environment.

When a firm is geographically distant or culturally dissimilar from a market, it faces challenges in understanding local consumer behaviors, regulatory landscapes, and business practices. These gaps in knowledge and understanding can lead to ineffective strategies, poor market entry decisions, and challenges in building trust with local stakeholders. As firms operate in foreign environments, the lack of established connections and insights can hinder their ability to compete effectively and adapt to local demands.

In contrast, high investment in local partnerships, familiarity with local contexts, and strong export capabilities tend to mitigate the liability of outsidership. Engaging with local partners and developing a deep understanding of the market helps firms reduce gaps in knowledge and effectively navigate the business landscape.