Overcoming the liability of origin: cross-listing in developed economies as a signal

Abstract

Purpose

The purpose of this paper is to investigate the role of cross-listing in overcoming liability of origin (LOO) facing emerging economy corporations (EECs).

Design/methodology/approach

This paper takes Chinese firms' cross-listing in Hong Kong and the firms' establishment of international joint ventures (IJVs) with foreign partners as the research setting. This is an empirical study using Heckman's self-selection model as the primary econometric technique and two-stage least square (2SLS) regressions as the supplementary estimation procedure.

Findings

Cross-listing in developed economies can serve as a signal for EECs to overcome the LOO. In addition, the regional institutional voids of emerging economies (EEs) and state ownership are prominent boundary conditions shaping this effect.

Research limitations/implications

Only Chinese firms and the firms' cross-listing in Hong Kong are considered for the empirical context as a result of data availability.

Practical implications

This paper provides a practical solution for EECs whose internationalisation tends to be hindered by the LOO.

Originality/value

This study is of high importance in that it centres on a distinctive and challenging problem faced with EECs—the LOO. Besides, it ascribes this liability to a matter of information asymmetries and explores how cross-listing can serve as a signal to cope with this challenge.

Citation

Wei, J., Zheng, J. and Zuo, Y. (2023), "Overcoming the liability of origin: cross-listing in developed economies as a signal", International Journal of Emerging Markets, Vol. 18 No. 11, pp. 5319-5337. https://doi.org/10.1108/IJOEM-01-2021-0111