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Smaller may be beautiful but is it more risky? Assessing and managing political and economic risk in Costa Rica

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  • Oetzel, Jennifer

Abstract

The purpose of this exploratory study is to examine how managers assess and manage political and economic risk once their company's foreign direct investment (FDI) is on the ground. Using a qualitative research design involving personal interviews with CEOs/top managers of foreign firms operating in Costa Rica, findings indicate that managers at the subsidiary level generally do not engage in political and economic risk assessment on an ongoing basis, nor do they coordinate risk assessment with MNE headquarters. Propositions are developed that suggest subsidiary size may be more important for determining a firm's political risk than the overall size of the corporation. Also, a firm's political risk may vary over time as the host country's policy priorities change, particularly the policies which favor some industries over others. Findings are expected to contribute to the literature on country risk and bargaining theories as well as to the research on the role of the subsidiary in FDI.

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  • Oetzel, Jennifer, 2005. "Smaller may be beautiful but is it more risky? Assessing and managing political and economic risk in Costa Rica," International Business Review, Elsevier, vol. 14(6), pages 765-790, December.
  • Handle: RePEc:eee:iburev:v:14:y:2005:i:6:p:765-790
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    Cited by:

    1. Oetzel, Jennifer M. & Banerjee, Sudeshna Ghosh, 2008. "A case of the tortoise versus the hare? Deregulation process, timing, and firm performance in emerging markets," International Business Review, Elsevier, vol. 17(1), pages 54-77, February.
    2. repec:eee:iburev:v:27:y:2018:i:1:p:102-112 is not listed on IDEAS
    3. Desbordes, Rodolphe, 2007. "The sensitivity of U.S. multinational enterprises to political and macroeconomic uncertainty: A sectoral analysis," International Business Review, Elsevier, vol. 16(6), pages 732-750, December.
    4. Pezderka, Noemi & Sinkovics, Rudolf R., 2011. "A conceptualization of e-risk perceptions and implications for small firm active online internationalization," International Business Review, Elsevier, vol. 20(4), pages 409-422, August.
    5. Al Khattab, Adel & Anchor, John R. & Davies, Eleanor M.M., 2008. "The institutionalisation of political risk assessment (IPRA) in Jordanian international firms," International Business Review, Elsevier, vol. 17(6), pages 688-702, December.
    6. Sung-Hoon Lim, 2011. "Risks in the North Korean Special Economic Zone: Context, Identification, and Assessment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 50-66, January.
    7. Sung-Hoon Lim, 2011. "Risks in the North Korean Special Economic Zone: Context, Identification, and Assessment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(1), pages 50-66, January.
    8. Rios-Morales, Ruth & Gamberger, Dragan & Smuc, Tom & Azuaje, Francisco, 2009. "Innovative methods in assessing political risk for business internationalization," Research in International Business and Finance, Elsevier, vol. 23(2), pages 144-156, June.

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