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A Model for Making Foreign Direct Investment Decisions Using Real Variables for Political and Economic Risk Analysis

Author

Listed:
  • Carl B.McGowan, Jr.

    (Norfolk State University, USA)

  • Susan E. Moeller

    (Eastern Michigan University, USA)

Abstract

The Foreign Investment Risk Matrix (FIRM) developed by Bhalla (1983) uses political and economic risk measures for foreign direct investment decision making. FIRM may be used to develop a matrix that categorizes countries based on political risk and economic risk as acceptable, unacceptable, or uncertain for investment.We demonstrate using political and economic risk variables that are available on the internet in an expanded model using three measures of political risk and three measures of economic risk. After determining the group of countries that would be acceptable for FDI, the multinational companies can focus on further analysis of acceptable countries.

Suggested Citation

  • Carl B.McGowan, Jr. & Susan E. Moeller, 2009. "A Model for Making Foreign Direct Investment Decisions Using Real Variables for Political and Economic Risk Analysis," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 7(1), pages 27-44.
    • Handle: RePEc:mgt:youmgt:v:7:y:2009:i:1:p:027-044
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    Cited by:

    1. Ming-Chang Huang & Tian-Jyun Gong & Shih-Ping Sun & Ping-Hsin Lin, 2023. "Obstacles or catalysts? A balanced view of formal institutional risks on FDI location choice," Asian Business & Management, Palgrave Macmillan, vol. 22(5), pages 2077-2105, November.

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    More about this item

    Keywords

    political risk analysis; economic risk analysis; foreign direct investment; multinational corporation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • F2 - International Economics - - International Factor Movements and International Business

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