A Stranger in a Strange Land Micro Political Risk and the Multinational Firm Ilan Alon
Business Horizons (2009) 52, 127—137
www.elsevier.com/locate/bushor
A stranger in a strange land: Micro political risk and the multinational firm
Ilan Alon, Theodore T. Herbert *
Crummer Graduate School of Business, Rollins College, 1000 Holt Avenue - 2722, Winter Park, FL 32789, U.S.A.
KEYWORDS
Micro political risk; Risk assessment; Environmental analysis; Multinational corporation
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 firmspecific 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. # 2008 Kelley School of Business, Indiana University. All rights reserved.
1. Micro political risk: An overview
International commerce has grown incredibly, yet much of it is susceptible to diverse types of risks. One major risk is political risk, which encompasses political events and processes that can negatively affect doing business. This risk has both a macro perspective, affecting all firms in a country, and a micro perspective, affecting only select industries, firms, or projects. Simply put, micro political risk is
* Corresponding author. E-mail
www.elsevier.com/locate/bushor
A stranger in a strange land: Micro political risk and the multinational firm
Ilan Alon, Theodore T. Herbert *
Crummer Graduate School of Business, Rollins College, 1000 Holt Avenue - 2722, Winter Park, FL 32789, U.S.A.
KEYWORDS
Micro political risk; Risk assessment; Environmental analysis; Multinational corporation
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 firmspecific 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. # 2008 Kelley School of Business, Indiana University. All rights reserved.
1. Micro political risk: An overview
International commerce has grown incredibly, yet much of it is susceptible to diverse types of risks. One major risk is political risk, which encompasses political events and processes that can negatively affect doing business. This risk has both a macro perspective, affecting all firms in a country, and a micro perspective, affecting only select industries, firms, or projects. Simply put, micro political risk is
* Corresponding author. E-mail
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