ABSTRACT
The political and legal environment provides a critical context for the MNE at home and abroad. As the opening case illustrates, political factors, including political risk, are part and parcel of conducting business across national boundaries. Such factors are geopolitical, in that they are concerned with the relations among nations and their relative bargaining power in the world, as well as internal, in that they are related to domestic constituencies and their position regarding trade, investment, and other international business issues. As the opening case illustrates, these two sets of factors are interrelated. For instance, the ideological affinity between the current leaders is a major reason behind the mimicking of Venezuela’s approach to FDI by Bolivia. Historical factors, such as the animosity between Bolivia and Chile, are shown to retain their importance in current affairs more than a century later. The MNE, on its part, must not only respond to the pressures exerted by political factors, but also be proactive in anticipating their repercussions, responding to multiple constituencies, and continuously reassess its options in a changing environment.
