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

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Abstract

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.
Original languageEnglish
Publication date25 Jun 2019
Publication statusPublished - 25 Jun 2019
EventAcademy of International Business 2019 Annual Meeting - Copenhagen Business School, Copenhagen, Denmark
Duration: 24 Jun 201927 Jun 2019
https://aib.msu.edu/events/2019/Program.asp

Conference

ConferenceAcademy of International Business 2019 Annual Meeting
LocationCopenhagen Business School
CountryDenmark
CityCopenhagen
Period24/06/201927/06/2019
Internet address

Keywords

  • Political risk
  • Risk assessment
  • Event data
  • Triangulation
  • Granger causality test
  • Panel data

Cite this

Jensen, C. (2019). How valid are common indicators of political risk used in IB research and practice?. Abstract from Academy of International Business 2019 Annual Meeting, Copenhagen, Denmark.