ABSTRACT
This chapter reviews many of the new attempts to cope with the issue of political risk. It begins the review of the political risk literature by examining three representative writers on political risk: Franklin Root, Stefan Robock, and Robert Green. It identifies crude categories of political risk, and each gives some analysis of the causes of political risk. One of the many problems encountered in trying to analyze political risk is the semantic confusion surrounding the concept itself. The essential purpose of efforts is to minimize the uncertainty involved in overseas investment decisions by maximizing the accuracy of political risk estimates. The accurate identification of “political risks,” the manner in which probabilities are assigned to each political risk, and the selection of appropriate corporate responses—Root views all as crucial to the foreign investment decision process. Root has developed three categories of political uncertainty depending on how they affect the firm: transfer, operational and ownership/control.
