Causal mechanisms of COVID-19 disruptive effects on liability of foreignness and the emergence of new firm-specific advantages.

ABSTRACT

There is the need for comprehensive research on the disruptive effects of COVID-19 on international business (IB) in preparation for future disruption. However, we know little about the causal mechanisms of the phenomenon which impacted IB. Based on a case study of a Japanese automotive firm in Russia, we investigate how firms tackle institutional entrepreneurship with firm-specific advantages to overcome the disruptive effects. Consequently, the pandemic increased institutional costs due to greater uncertainty in Russian regulatory institutions. To manage this, the firm developed new firm-specific advantages to deal with the increasing uncertainty of regulative institutions. The firm united with other firms to motivate public officials to advocate for semi-official debates. Our study contributes to extending intersecting studies on the liability of foreignness and firm-specific advantages through the lens of institutional entrepreneurship. We propose a holistic conceptual process model of the causal mechanisms and a novel construct for new firm-specific advantages.