A suggested model for the measurement of the impact of political risk on direct foreign investment : a general framework

Abstract EN

Foreign Direct Investment has become an important subject in the field of international economy in general and public policy in particular.

The high political risks involved in any foreign direct investment has also become a main concern for policy analysts as well as policy makers.

Therefore, this research has attempted to construct an analytical-quantitative model that enables researchers in the fields of political science and business administration, in an interdisciplinary efforts, to measure the political risks involved in any foreign direct investment.

The.

research's independent variable is political risk and is operationalized using three major instruments.

The first instrument focuses on the distinction between risk and uncertainty as developed by Hanedel, West, and Meadow (1977) or in Taylor and Jodice (1983), and is called Political System Stability Index.

The second instrument is based on the absence of domestic and civil conflict and violent behavior as can be found in Feierabend and Feierabend (1966) or in Taylor and Jodice (1983).

The third instrument can be found in Gurr and Ruttenberg's (1967) theory and model on the condition of civil violence.

The dependent variable is the annual average foreign flow of investment for each targeted countries' chosen by any researcher.

The data collected by researchers could then be analyzed using quantitative methods, such as Pearson Product Moment Correlation, in order to determine the relationship between the level of foreign direct investment flows and the degree of political risk for all subsequent years-for the sample of countries chosen-that has to be at least five or more countries.

Therefore, future works, using this model are highly recommended in order to test the validity and the applicability of the model.