A study of managers' political risk perceptions and political risk assessment procedures within Kuwaiti international firms during the 'Arab Spring'

Alyatama, Sundus and Busby, Jerry (2016) A study of managers' political risk perceptions and political risk assessment procedures within Kuwaiti international firms during the 'Arab Spring'. PhD thesis, Lancaster University.

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The occurrence of high profile political events coupled with the wave of firm internationalisation have, in recent years, aroused interest in understanding the phenomenon of political risk. Although risk perception and political risk assessment are already established topics, there is limited knowledge about managerial perception of political risk while undertaking international business activities. And, while it can be argued that the way managers perceive risk is important to the subsequent assessment of such risk, the literature on risk perception and the literature on risk assessment have not been connected. Furthermore, there is a well-established body of literature on risk perception using and supporting the relevance of the psychometric framework – this framework has been successfully used to study risks like technological and environmental risks but not political risk in particular. Moreover, the existing political risk literature has not used any generally acknowledged approach like the psychometric framework to enhance our understanding of political risk perception. This study presents findings on managerial perception and assessment of political risk in the context of the developing economy of Kuwait, and the recent unique series of political events known as the Arab Spring. It argues that understanding both risk perception and assessment, and their inter-relationship, is important in understanding how and why international firms respond to political risk. Data for this study was collected through a mixed methods approach of a questionnaire survey and interviews to achieve two broad objectives: to study managerial political risk perception of Kuwaiti international firms based on the psychometric approach; and to study the political risk assessment and how this relates to political risk perception. The psychometric framework-based questionnaire survey data was collected from 120 managers from across 44 firms. The interview data was collected using face-to-face, semi-structured interviews with 34 managers in 34 Kuwaiti firms. The main findings revealed that the general model, and the specific risk attributes, used in the traditional psychometric approach are highly applicable to political risk perception. They also showed clear differences in managers’ perceptions of governmental and non-governmental risks, with higher risk perceptions being associated with non-governmental risk. In addition, the findings indicate that there is no influence of firms’ characteristics on political risk perceptions. This confirms the basic assumption of the psychometric approach, which is that the characteristics of the perceived risk, not the characteristics of the individual perceiver, are what primarily determine risk perception. The findings also indicated that the level of institutionalisation of political risk assessment is not significantly correlated with any obvious firm characteristic. In addition, managers were found to resist quantitative assessment despite their high awareness of political risk (especially for nongovernmental risks). There are two main intended contributions of this study to the literature on political risk. First, by applying the psychometric paradigm to political risk, this study has not only extended the applicability of the psychometric framework but also made a connection between the political risk literature and risk perception literature. Second, the specific observations reported by the study – for example, the way managers dichotomise risks between governmental and non-governmental sources and the reasons why managers resist quantitative assessment – make a contribution to our understanding of how political risks to firms are considered and prioritised at an organisational level. The findings from this study also have practical implications for managers of international firms. For example, the strong explanation of political risk perceptions provided by the psychometric framework may help managers predict the risk perceptions of other managers who they may have to persuade or negotiate with. Understanding the reasons why managers dichotomise governmental and nongovernmental risk also has practical importance, as it helps them to reflect on their own circumstances and assess whether this dichotomisation is appropriate to these circumstances. Similarly, knowing the way that other managers rationalise the use, or non-use, of quantitative assessment allows a firm to assess whether such reasons fit their own problems, and so come to a deeper understanding of how much formal assessment of political risk is appropriate to their situation. There are several limitations to this study. Some relate to its external validity, because it is difficult to generalise the findings outside of Kuwait, and some to its internal validity, because the firms included in the sample may not be completely representative. Other limitations include possible sampling bias due to the self- selection process by potential respondents, and using only a single respondent manager per firm in the interview study. Also it is a cross sectional study, not a longitudinal one, and the characteristic of managerial position is the only individual characteristic considered as potentially affecting political risk perception. The recommendations for future work would therefore include carrying out similar studies that consider larger samples and different contexts to improve internal and external validity. Such studies should include longitudinal designs and consider other individual characteristics besides managerial position (such as age, gender and education), and their effect on managerial political risk perception.

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Thesis (PhD)
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29 Nov 2016 09:42
Last Modified:
30 Mar 2024 01:20