This study demonstrates the important role of the compatibilizer in blown films of a ternary blend of a thermotropic liquid crystalline polymer (TLCP (a poly(ester amide)), dispersed phase), a polyetherimide (matrix), and a poly(ester imide) (PEsI, compatibilizer). We investigated the morphology of the blown films via transmission electron microscopy and scanning electron microscopy, as well as optical microscopy. A stripe structure of TLCP phase was observed in the blown film, which evidently showed unequal biaxial deformation of the dispersed phase. The compatibilizer helped to deform the dispersed phase in the hoop direction as well as in the flow direction. It was evident that the amount of compatibilizer played a very important role in the dispersion and the deformation of the TLCP phase. It was found that 0.6 wt% of the compatibilizer was the optimum amount when 10 wt% TLCP was included. Coalescence of the TLCP phase was observed when excessive amount of the compatibilizer was used, resulting in a larger dispersed-phase size. The crystalline structure of the dispersed phase did not vary with the compatibilizer. A qualitative explanation of the effect of the compatibilizer on the deformation of the dispersed droplets is given based on simple droplet elasticity and interfacial tension. (C) 2001 Elsevier Science Ltd. All rights reserved.