Institutional Liability of Multinational Enterprise in Host Country

Internationalisation of multinational enterprises (MNEs) often involves costs of doing business abroad and encounters various liabilities. However, there lacks attention on components of liabilities that caused by institutional impacts on MNEs. These components affect profitability, growth and survival of MNEs in host countries but have never been conceptualised or examined separately before in the literature. Therefore, this paper tries to conceptualise institutional liability to emphasise institutional impacts on MNEs. It starts by reviewing definitions, sources and effects of various liabilities and then separate costs resulted from three pillars of institutions from other costs. Furthermore, possible ways of overcoming institutional liability are also presented.