Building for the Shah: Market Entry, Political Reality and Risks on the Iranian Market, 1933–1939

Abstract

Unlike other Western European companies operating in Iran between the first and second world wars, the Danish construction firm Kampsax pursued a forestalling strategy in dealing with the political imperative of Reza Shah. The British Bank of the Middle East and the Anglo-Persian Oil Company, by contrast, pursued an absorption strategy. That is, they actively tried to “Iranize” their operations by appointing native Iranians to important managerial positions. Kampsax, however, made no attempt at “Iranization,” depending entirely on contractual relations with local builders and labor forces. This no doubt contributed to the firm's exposure as a totally foreign enterprise and lessened their chances of gaining favor with the Shah's advisors, who pursued an overtly nationalistic set of policies. The history of Kampsax in Iran therefore offers a useful case to use the concept of the political risks in relation to multinationals working in dictatorial settings. This paper undertakes such a study and concludes that the absorption strategy that was already being pursued by British firms offers a better way of managing such risks.