Informing country risk assessment in international business

Adel Alkhattab,William Stein,Jehad Saleh Aldehayyat

doi:10.5539/ijbm.v5n7p54

Abstract

In addition to assessment of commercial risks, when making decisions about assets or activities in other countries, multinational corporations also require to assess political risks such as the stability of government and potential changes in the treatment of non-domestic corporations. Environmental scanning is well covered in the literature. Although country risk assessment may be regarded as a specialist sub-set of environmental scanning, the sources of information in terms of independence, objectivity, accuracy, trustworthiness and absence of bias, to inform this process are not well explored in the literature. This study addresses this gap. We survey multinationals operating from Jordan and examine sources of information within a corporation-specific characteristics framework. The main findings are that multiple sources of information are used, of which internal sources are the most important, both personnel at headquarters and personnel abroad. Analysis of the survey data on the basis of corporation-specific characteristics revealed no significant correlations. There are implications for governments with regard to perceived reliability of the information they collect and make available to multinationals. There are also implications for multinationals in terms of resourcing of personnel, especially those based abroad, and a need for an awareness of the reliance often placed on such sources.

Highlights

Jehad Aldehayyat Al-Hussein Bin Talal University College of Business Administration and Economics, Department of Business Administration
The aim of this paper is to address this deficiency and to examine critically the sources of information used by multinationals to assess country risk
This broad objective of examining sources of information that are used for country risk assessment, is divided into two sub-objectives: a) to analyse current managerial practices in multinational corporations with regard to the sources of information used for country risk assessment and b) to explore the correlations between the sources of information used and corporation-specific characteristics of the multinationals surveyed

Summary

Introduction

Guidance for developing a reasoned and systematic approach to assessing the specific sources and consequences of the political risks facing a firm or its business units has, far, been sorely lacking (Alon and Herbert 2009). The aim of this paper is to address this deficiency and to examine critically the sources of information used by multinationals to assess country risk. This broad objective of examining sources of information that are used for country risk assessment, is divided into two sub-objectives: a) to analyse current managerial practices in multinational corporations with regard to the sources of information used for country risk assessment and b) to explore the correlations between the sources of information used and corporation-specific characteristics of the multinationals surveyed

Objectives

Methods

Findings

Discussion

Conclusion