The use of political risk assessment techniques in Jordanian multinational corporations

Abstract

This paper describes and explains the use of political risk assessment techniques in Jordanian multinational corporations (MNCs). A multi‐method approach to collect data was followed. A self‐report questionnaire was delivered by hand to the general managers of all Jordanian MNCs which were identified as operating internationally. Semi‐structured interviews were used as a means of elaborating on the findings from the questionnaire. The study identified the extensive use of heuristic political risk assessment techniques (due to their flexibility, simplicity and low cost). Scientific techniques, on the other hand, were used by only a minority of MNCs. As has been the case in earlier studies, flexibility, simplicity and cost considerations were all found to be influential in this regard. However, the study also found that key decision‐makers in Jordanian MNCs believe that official data are subject to censorship and are therefore not reliable. This undermines the efficiency of using highly sophisticated scientific techniques. Since there are a number of other countries in the Middle East – and elsewhere – in which these considerations also apply, this finding has important implications for international businesses which operate in these countries, whatever their home country.

Keywords:

• political risk
• techniques
• multinational corporations
• Jordan
• international business

Acknowledgement

The authors wish to acknowledge the financial support of Al Hussein Bin Talal University in carrying out the research for this paper.

Notes

1. In the case of the US and Turkish studies, a five‐point scale was used; in the case of the Canadian study a three‐point scale was used. In all three cases, managers were asked to rate the utility of the technique used.