Theory and History
Chapter 11: Foreign direct investment in high-risk environments: A theoretical perspective
This chapter examines why some foreign investors enter high-risk environments that other investors avoid. It considers why the success of these firms often fails to encourage other firms to enter. It identifies risk-management skills that some investors possess but many others lack. These skills allow firms to devise and implement measures to prevent and mitigate adverse outcomes. It offers a typology of risky situations and shows how different combinations of risk management strategies can be used to control them. The behaviour of successful foreign investors in high-risk environments can therefore be explained in terms of specific host-country risk factors and the capabilities of firms in managing the risks associated with them.
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