How valid are common indicators of political risk used in IB research and practice?

Using international business research about political risk as a field experiment the papers seeks to assess the validity of current political risk or governance indicators. Vernon’s claim with the obsolescing bargaining model (OBM) that political risk plays out at the project rather than country level is investigated.
Relationships are analysed among longitudinal, quarterly historical data series on: political events, expert-based political risk assessments and activity data. The aim is to show that by observing entrepreneurial investment activity at the project level we can get closer to predict political uncertainty and as it plays out
via negative political events with massive material damage. Preliminary findings based on Granger causality testing combined with ordinary benchmark coefficient estimates using panel data techniques render relatively strong support for this claim. The implications could be that by observing other firms’ experiences rather than relying on expert-based risk indicators, investors could get deeper insights into political risk, as it occurs and therefore also to some extent be able to better predict and avoid it.