Integrating institutional entrepreneurship and corporate entrepreneurship theories into the setting of international business, we explore how liabilities of foreignness are purposefully constructed by incumbents in a domestic market through institutional norm manipulation strategies that established organizations use to change the ‘rules of competition’ in their field. The analysis of multiple case studies suggests that, through social norm manipulations, companies manage not only their own legitimacy, but also the legitimacy of their competitors and thereby construct liabilities of foreignness for the competition. We develop a typology of legitimacy manipulation strategies employed by established organizations in response to competitive challenges. Three strategies used by the incumbents to ‘prevent’, ‘eradicate’ or ‘palliate’ the new entrant’s impact include three types of manipulation: (1) changing importance of legitimacy dimensions, (2) raising the legitimacy threshold and (3) altering perceptions of competitor’s performance. Successful legitimacy manipulations are shown to lead to institutional immunization of the incumbents from similar challenges in the future.