External Environments Replies

Key Term: Cause of Risk 

1. Key Term and Why You Are Interested in It (100 words minimum)

I was aware of what some of the risks could be that could negatively impact a country and its business(es), but after reading the textbook, I realized the impact these causes of risks can have on an international level as well. I understood the impacts and possible consequences on a surface level, but not at the entirety. I could say the reason why I am interested in conducting further research on the key concept “causes of risk” is due to academic curiosity and to gain more knowledge and understanding on the impact on international businesses on a deeper level. Since I’m from Nepal, the way the government operates is somewhat different compared to how the United States operated and I am curious to see the results of how other governments operate regarding various causes of risks on international business.

2. Explanation of the Key Term (100 words minimum)

There are always risks that are entailed in conducting a business, whether that is local, domestic business or an international business that has partners in foreign countries. The various risks could be related to the economy and/or politics that could negatively harm a nation. Sometimes, these risks can be prevented but, in some cases, it cannot be controlled. An astute business professional must understand and identify what the causes of the risks in a foreign nation could be/are to prepare ahead of time, so that the organization can succeed in the business. The book International Business with Biblical Worldview by Brian Satterlee states that violence and conflict, terrorism and kidnapping, and confiscation, expropriation, and nationalism are the three causes of risk for an international business (Satterlee, p. 90).

3. Major Article Summary (200 words minimum)

The article “The impact of terrorism on international mergers and acquisitions: Evidence from firm-level decisions” by Babet Hogetoorn and Michiel Gerritse conducts research focusing on the topic of terrorism and how it affects the ability of a country to attract investment and if the foreign investors lower their direct investments or entirely withdraw them due to the fear that arise from terrorism (Hogetoorn & Gerritse, p. 524). The research also focuses on the impact terrorism has on any decisions contributing to international merger and acquisitions. The authors conducted the study on decisions of “8,872 firms of over 116 countries over 16 years” regarding impact of terrorism on merger and acquisition (Hogetoorn & Gerritse, p. 523).

Through the content analysis and research, the authors concluded that the terrorism have a negative impact on the national direct investment. The terrorist attacks that occur avert and reduce the chances of receiving international investment(s). Through the research, the authors also found that most firms withhold from investing entirely, as most international investors are taking a risk and are sensitive to “local terrorism” (Hogetoorn & Gerritse, p. 534). These results indicate that for a firm to invest, terrorism is a sensitive topic that most are not willing to take a risk investing in the organization(s) of the country that can bring obvious threat to the success of the host organization.

4. Discussion

 

1. The article mentioned and summarized above is research about how terrorism has a negative impact on international mergers and acquisitions. In addition, it also depicts the fear investors have, to invest internationally in other countries. Sometimes, the causes of risks such as terrorism and kidnapping cannot fully be controlled by an organization. It could just happen one day, with people having little to no information about the event and this applies to the kidnapping situation as well. An astute business professional must know if those events occur frequently or not, and if the business must be conducted, strategically sound protocols must be in place for the business to not be heavily negatively impacted. In doing so just as the main article above, one of the negative impacts is preventing attraction from international investments. Having strategic protocols that prove the organization can be prevented from the impacts of these causes of risks could give foreign corporations a surety to invest in.

2. The article “The impact of terrorism on the FDI of the EU and EEA Countries” by the authors Heric Bezic, Tomislav Galovic, and Petar Misevic is on how terrorist attacks impact the Federal Direct Investment of the European countries. Just as the main article, it concluded that terrorism depresses FDI based on the 29 countries that they conducted the research on. The second article is like the previous article in that the researched concluded “terrorism is proven to prevent FDI inflows in the recipient economies” (Polyxeni & Theodore, 2019). The article “The War on Drugs in Mexico and Transnational Corporate Control” by Martha Idalia Chew Sánchez is on the experience of Mexican people with kidnapping, extortions, and such due to drugs over the past few years and how the government is trying to use government forces to stop these acts (Sánchez, 2019). These types of crimes do not make it safe for employees and can be one of the major determinants in international business. The final article “Prominent need to increase the level of education and awareness in the field of terrorist activities” by Airat Halitovich Tukhvatullin and Vitaly Anatolievich Epshteyn is related to terrorism as well, but confused more on the religious, as well as a “combination of socio-economic, confessional, and ethnic problems” (Tukhvatullin & Anatolievich, 2021). All these articles relate to each other as they focus on the causes of risks and how it impacts on international business(es). An astute business professional must understand and be prepared for risks that could fall on the success or the organizations and combat them.

References

Bezic, H., Galovic, T., & Misevic, P. (2016). The Impact of Terrorism on the FDI of the EU and EEA Countries. Zbornik Radova Ekonomskog Fakulteta u Rijeci: Casopis Za Ekonomsku Teoriju i Praksu/Proceedings of Rijeka School of Economics: Journal of Economics and Business, 34(2), 333–362.  https://doi.org/http://www.efri.hr/zbornik-radova

Hogetoorn, B., & Gerritse, M. (2021). The impact of terrorism on international mergers and acquisitions: Evidence from firm-level decisions. Journal of Peace Research, 58(3), 523–538.  https://doi.org/10.1177/0022343319900207

Polyxeni, K., & Theodore, M. (2019, November). An empirical investigation of FDI inflows in developing economies: Terrorism as a determinant factor. Retrieved January 24, 2022, from  https://www-sciencedirect-com.ezproxy.liberty.edu/science/article/pii/S1876201812001876?via%3Dihub

Sánchez, M. I. C. (2019). The War on Drugs in Mexico and Transnational Corporate Control. Perspectives on Global Development & Technology, 18(1/2), 175–185.  https://doi.org/10.1163/15691497-12341512

Satterlee, B. Chapter 3. International Business with Biblical Worldview (p. 90).

Tukhvatullin, A. H., & Epshteyn, V. A. (2021). Prominent need to increase the level of education and awareness in the field of terrorist activities. Propósitos y Representaciones, 9, 1–9. https://doi.org/10.20511/pyr2021.v9nSPE3.1285