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A stranger in a strange land: Micro political risk and the multinational firm

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  • Alon, Ilan
  • Herbert, Theodore T.

Abstract

When a firm chooses to enter or continue business in a foreign market, it becomes exposed to associated political risks which should be assessed and managed. Help is available for becoming aware of the level of macro political risk; that is, the political risk across industries or all businesses in entire countries or geographic regions. Yet, surprisingly little guidance exists by which to identify and assess firm-specific political risks, termed micro political risk. Herein, we offer some new perspectives on the nature of micro political risk within a host country, illustrating how it stems from economic, societal, and governmental forces. We have compiled a number of firm-specific variables which can affect the firm's micro political risk profile, and advance an innovative methodology by which executives can address these variables and develop an assessment of their firm's micro political risk. Examples of micro political risk situations are provided, along with discussion of implementing the proposed methodology.

Suggested Citation

  • Alon, Ilan & Herbert, Theodore T., 2009. "A stranger in a strange land: Micro political risk and the multinational firm," Business Horizons, Elsevier, vol. 52(2), pages 127-137.
    • Handle: RePEc:eee:bushor:v:52:y:2009:i:2:p:127-137
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    References listed on IDEAS

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    1. Haner, F. T., 1979. "Rating investment risks abroad," Business Horizons, Elsevier, vol. 22(2), pages 18-23, April.
    2. de la Torre, Jose & Neckar, David H., 1988. "Forecasting political risks for international operations," International Journal of Forecasting, Elsevier, vol. 4(2), pages 221-241.
    3. Rich, Gillian & Mahmoud, Essam, 1990. "Political risk forecasting by Canadian firms," International Journal of Forecasting, Elsevier, vol. 6(1), pages 89-102.
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    Cited by:

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    2. Robert J. Moore, 2021. "Emerging from war: Public policy and patterns of foreign direct investment recovery in postwar environments," Journal of International Business Policy, Palgrave Macmillan, vol. 4(4), pages 455-475, December.
    3. Carsten Hansen & Carlos Mena & Heather Skipworth, 2017. "Exploring political risk in offshoring engagements," International Journal of Production Research, Taylor & Francis Journals, vol. 55(7), pages 2051-2067, April.
    4. Jiménez, Alfredo & Benito-Osorio, Diana & Puck, Jonas & Klopf, Patricia, 2018. "The multi-faceted role of experience dealing with policy risk: The impact of intensity and diversity of experiences," International Business Review, Elsevier, vol. 27(1), pages 102-112.
    5. Xia Han & Xiaohui Liu & Lan Gao & Pervez Ghauri, 2018. "Chinese Multinational Enterprises in Europe and Africa: How do They Perceive Political Risk?," Management International Review, Springer, vol. 58(1), pages 121-146, February.
    6. Eduardsen, Jonas & Marinova, Svetla, 2020. "Internationalisation and risk: Literature review, integrative framework and research agenda," International Business Review, Elsevier, vol. 29(3).
    7. Violeta IFTINCHI & Gheorghe HURDUZEU, 2018. "Bilateral Investment Treaties: Last Resort Strategy to Mitigate Political Risks?," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 19(1), pages 4-14, March.
    8. Vincent Montenero, 2018. "Russia's Integration to the Globalized Automotive System: Solutions Adopted by Multinationals and Impact on the Local Industrial Environment," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 4(1), pages 31-47.
    9. Mahmud Hossain & Gerald J. Lobo & Santanu Mitra, 2023. "Firm-level political risk and corporate tax avoidance," Review of Quantitative Finance and Accounting, Springer, vol. 60(1), pages 295-327, January.
    10. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    11. Ewa Martyna-David, 2016. "Political Risks of Western Companies in a Transforming Country. Evidence from Russia 2014," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 14(1), pages 21-35.
    12. Tengyuan Chang & Xiaopeng Deng & Bon-Gang Hwang, 2019. "Investigating Political Risk Paths in International High-Speed Railway Projects: The Case of Chinese International Contractors," Sustainability, MDPI, vol. 11(15), pages 1-15, August.
    13. Alexander Braun & Marius Fischer, 2018. "Determinants of the Demand for Political Risk Insurance: Evidence from an International Survey," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(3), pages 397-419, July.
    14. Suarez, Ronny, 2015. "How to model the impact of political risk," MPRA Paper 64559, University Library of Munich, Germany.
    15. Jian Min & Jiaojiao Zhu & Jian-Bo Yang, 2020. "The Risk Monitoring of the Financial Ecological Environment in Chinese Outward Foreign Direct Investment Based on a Complex Network," Sustainability, MDPI, vol. 12(22), pages 1-26, November.
    16. Grzegorz Waszkiewicz, 2015. "Political Risk and National Debt Markets in Advanced Economies," Proceedings of FIKUSZ 2015, in: Jolán Velencei (ed.),Proceedings of FIKUSZ '15, pages 263-275, Óbuda University, Keleti Faculty of Business and Management.

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