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1 – 10 of over 77000Tahir Ali, Aurangzeab Butt, Ahmad Arslan, Shlomo Yedidia Tarba, Sniazhana Ana Sniazhko and Minnie Kontkanen
This study investigates an under-researched yet fundamental question of how a developed country multinational enterprises (DMNE) perceives and manages political risks when…
Abstract
Purpose
This study investigates an under-researched yet fundamental question of how a developed country multinational enterprises (DMNE) perceives and manages political risks when undertaking infrastructure projects in the emerging markets (EMs).
Design/methodology/approach
The authors use an abduction-based qualitative research approach to analyze six international project operations of a multinational enterprise originating from Finland in five EMs.
Findings
The findings suggest that the overall nature of political risks in EMs is not the same, except few political risk factors that are visible in most EMs. Consequently, the applied risk management mechanisms vary between EMs, except with few common mechanisms. The authors develop an integrative analytical framework of political risk management based on the findings.
Originality/value
This paper is one of the first studies to identify political risk factors for western MNEs while undertaking international project operations and link them to reduction mechanisms used by them. The authors go beyond the notion of risk being conceptualized at a general level and evaluate 20 specific political risk factors referred to in extant literature. The authors further link these political risk factors with both social exchange and transaction cost theories conceptually as well as empirically. Finally, the authors develop a relatively comprehensive analytical framework of political risk management based on the case projects' findings that combine several strands of literature, including the social exchange theory, transaction cost theory, international market entry, project management and finance literature streams.
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John R. Anchor and Hana Benesova
This chapter seeks to conceptualize a new approach to the identification of the factors influencing the adoption of a political risk assessment (PRA) function. By making use of…
Abstract
This chapter seeks to conceptualize a new approach to the identification of the factors influencing the adoption of a political risk assessment (PRA) function. By making use of firm value maximization and risk aversion and considering the rationale for risk management activities, a number of determinants are identified which can be deployed in future PRA studies. A model for predicting the PRA adoption decision is proposed. Geographical contextualization in one or more emerging markets (EMs) provides a further dimension of originality as well as reflecting an increasingly important international business phenomenon. Political risk (PR) and political risk assessment (PRA) are of increasing importance in the context of the growth and development of emerging markets (EMs). The latter provide opportunities for inward investment from more developed economies. There has also been a rapid growth in outward foreign direct investment (OFDI) from emerging markets to other economies. This chapter adds to the current understanding of PRA by examining this issue in emerging markets (EMs) through the model developed here.
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Weiling Jiang, Igor Martek, M. Reza Hosseini and Chuan Chen
Foreign direct investment in the infrastructure (FDII) of developing countries has a history of at least four decades. Bullish demand for foreign infrastructure services in…
Abstract
Purpose
Foreign direct investment in the infrastructure (FDII) of developing countries has a history of at least four decades. Bullish demand for foreign infrastructure services in developing countries, in combination with unstable political environments, has buoyed attention in political risk management (PRM). Even so, research into PRM of FDII remains fragmented and unmapped. Thus, the purpose of this paper is to identify the current body of knowledge in this area, uncover deficiencies and lay the foundation for further practical PRM research in FDII.
Design/methodology/approach
This paper offers a bibliometric-qualitative review of current literature on political risk in foreign infrastructure in developing countries. A 36-year period is identified, from 1983 to 2018. Publication year, area of focus, author(s), institution and country are classified and analyzed through the medium of social network analysis. The tools used are VOSviewer, CiteSpace and Gephi to analyze citation networks of 345 published papers. Out of 345 papers, 94 highly related studies were selected for further content analysis.
Findings
The study identified the research trends in related areas of PRM in infrastructure (e.g. PRM in international construction and foreign direct investment) by bibliometric analysis, which includes scattered researcher collaboration, wide-ranging and unfocused journal selection, unsystematic and discontinuous research themes. The specific research weakness in PRM in FDII is recognized by qualitative analysis from the perspective of PRM process, which reveals a lack of understanding of the impact of political risk factors, subjective risk estimations, lacking application of mature political risk database in FDII, combined with a shortage of complete and effective strategies for PRM in FDII in developing countries.
Originality/value
This paper is the first of its kind, providing a comprehensive benchmark survey of the research to date in PRM in foreign infrastructure investment in developing countries. It proposes a framework of future research agenda on PRM in FDII, including special issues on this topic, identification and assessment of political risk factors with objective methods, proposition of PRM strategies on FDII with proactive and active approaches, completing strategies of PRM with reactive strategies from the perspectives of whole life cycle of infrastructure projects, political risk factors and stakeholders. It also addressed the need to investigate the suitable literature databases for researching in this area.
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Izzet Darendeli, T.L. Hill, Tazeeb Rajwani and Yunlin Cheng
This paper aims to explore the ideas that social legitimacy (acceptance by the public within a country) serves as a hedge against political risk and that the perceived social…
Abstract
Purpose
This paper aims to explore the ideas that social legitimacy (acceptance by the public within a country) serves as a hedge against political risk and that the perceived social value of Multinational Enterprises (MNEs’) products or services improves firms’ social legitimacy and so resilience to political shock.
Design/methodology/approach
Drawing from a unique data concerning global construction activity and taking advantage of the Arab Spring as an exogenous, political shock, this paper teases out the relative effects of pre-shock experience and product/service emphasis.
Findings
The authors find that construction firms that worked on a higher proportion of socially beneficial projects – such as water infrastructure, transportation and telecommunications – recovered more quickly from political shock than did those that worked on projects primarily for manufacturing interests or the oil industry. The authors also find that deep experience in a country had no bearing on a firm’s ability to recover from political shock.
Originality/value
The findings suggest that market behaviors that enhance social legitimacy also enhance MNEs’ ability to survive in volatile political settings. These insights add to the political risk and nonmarket strategy literatures the idea that market strategies that are attentive to nonmarket strategic goals are an important addition to the toolkit for managing political risk. More specifically, when it comes to surviving political shock, pre-shock emphasis on socially beneficial products seems to create a social legitimacy buffer that enhances resilience more than do deep country experience and associated social and political ties with the political elite.
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There is an extensive research stream devoted to evaluating host country political risk as it relates to foreign investment decisions, and in today’s geopolitical climate, this…
Abstract
Purpose
There is an extensive research stream devoted to evaluating host country political risk as it relates to foreign investment decisions, and in today’s geopolitical climate, this type of risk is becoming increasingly salient to business leaders. Despite notable advancements related to understanding the importance of government-related risk, inconsistent conceptualizations and findings remain. Thus, the purpose of this paper is to offer a comprehensive overview of how host country political risk has been conceptualized, measured and studied in relation to multinational enterprises' (MNEs’) investment decisions. After reviewing the relevant literature, five major aspects of non-violent (government type, public corruption, leadership change) and violent (armed conflict, terrorism) political risk were identified. The organization and review of each aspect of political risk provide insights on fruitful directions for future research, which are discussed.
Design/methodology/approach
To identify research articles on political risk and foreign investment, 13 leading management and international business journals were searched using relevant keywords (January 2000 to January 2023). Moreover, reviewing articles from these journals led to locating and reviewing additional relevant articles that the authors cited. Keyword searches were also conducted on Google Scholar and Web of Science in an effort to identify relevant articles outside of the 13 targeted journals.
Findings
Both violent and non-violent aspects of host country political risk have been studied in relation to MNEs' investment decisions. Specifically, five major aspects of host country political risk were identified (government type, public corruption, leadership change, armed conflict and terrorism). Although the general consensus is that risk related to the government often creates obstacles for MNEs, conceptualizations, measures and findings in prior research are not uniform.
Originality/value
This paper provides a comprehensive overview of host country political risk and foreign investment. In doing so, the aspects of political risk are identified, organized and overviewed.
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Attila Yaprak and Keith T. Sheldon
Introduction During the last decade, political risk assessment has gained significance as a decision‐making variable in multinational firms as the political under‐currents shaping…
Abstract
Introduction During the last decade, political risk assessment has gained significance as a decision‐making variable in multinational firms as the political under‐currents shaping the global environment have impacted international business strategy. Political discontinuities in Chile and Iran, rising waves of instability in Central America and the Middle East, the crises in Poland and North Africa, and the explosive external debt of developing countries have underscored the impact of political events on international business.
Xiaopeng Deng, Sui Pheng Low, Xianbo Zhao and Tengyuan Chang
The purpose of this paper is to explore the micro-level variables contributing to political risks in international construction projects.
Abstract
Purpose
The purpose of this paper is to explore the micro-level variables contributing to political risks in international construction projects.
Design/methodology/approach
A total of 25 micro-level variables were identified from the literature review, and a questionnaire survey was performed with 138 professionals from both academia and industry. Then, the Spearman rank correlation was used to test whether there was agreement on ranking between the two respondent groups. Furthermore, the 25 variables were grouped into six underlying factors through the exploratory factor analysis.
Findings
The results indicated that the most critical variables were “project desirability to the host country,” “relationship with governments,” “misconduct of contractors,” “public opposition to the project,” “experiential knowledge of political risks” and “advantageous conditions of contract.” In addition, the opinions within each group were consistent and there was no significant disagreement on the rankings of variables between academics and practitioners. However, the academic and practitioner groups held different opinions on some individual variables. The impact direction of the variables was associated with confusion among the respondents.
Originality/value
The findings presented in this paper can help international construction enterprises effectively manage political risks in international construction projects.
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The subject of political risk for project‐selling firms has not been as thoroughly studied as it has for other international modes. This research aims to discuss the behavio‐of…
Abstract
The subject of political risk for project‐selling firms has not been as thoroughly studied as it has for other international modes. This research aims to discuss the behavio‐of project‐selling firms when facing a sudden political crisis. It examines how political turmoil forces the firms to either stay in the market or exit from it and discusses why there is variety in their responses. The study presents three historical cases about three project‐selling firms and discusses the variety in their activities before, during, and after a political crisis. For the analysis, this paper employs the concepts of knowledge and commitment from the network model for the internationalization process. The case analysis is intended to generate a hypothesis about the types of business responses and the reasons for them.
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Yusuf A. Choudhry and Syed H. Akhter
This paper explores the causes of political intervention in foreign firms' operations and provides a framework for the development of risk reducing strategies. Specific…
Abstract
This paper explores the causes of political intervention in foreign firms' operations and provides a framework for the development of risk reducing strategies. Specific suggestions for the management of the political environment in host countries are presented. Developing strategically appropriate responses for reducing political risk sustains a firm through periods of uncertain environmental development and helps it maintain its competitive market position.
The aims of this paper are: to explore the nature of political risk insurance (PRI) contracts as a form of regulation in the context of mining projects in developing countries; to…
Abstract
Purpose
The aims of this paper are: to explore the nature of political risk insurance (PRI) contracts as a form of regulation in the context of mining projects in developing countries; to examine how PRI providers factor corporate social responsibility (CSR) policies and practices of applicants in their initial decisions to provide PRI; to examine how CSR criteria are reflected in the terms of PRI contracts; to understand how failure to exercise good CSR practices by recipients of PRI affects insurance coverage; to shed light on how good CSR practices which minimize risk to companies and communities can be or are rewarded through PRI contracts; to identify opportunities for reform.
Design/methodology/approach
This article adopts a conceptual approach through analysis of the practical effects and public policy implications associated with use of PRI contracts as a regulatory mechanism to promote good CSR practices.
Findings
PRI contracts represent a form of proactive risk management used by investors. Because of the significant regulatory effect of the CSR provisions of PRI contracts provided by state‐based agencies, there is considerable potential for and value associated with greater transparency in the implementation of such contracts.
Originality/value
This article sheds light on the regulatory dimensions associated with the CSR provisions of PRI contracts. This represents a new contribution to the literature on CSR contracts, which until this point has focused largely on the CSR aspects of supply chain contracts.
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