Academic journal article Multinational Business Review

Towards an Understanding of Terrorism Risk in the MNE

Academic journal article Multinational Business Review

Towards an Understanding of Terrorism Risk in the MNE

Article excerpt

ABSTRACT:

Based on a literature review of terrorism and global business literature, this paper addresses those conditions that may lead to new considerations about risk and its management at policy and the MNE (multinational enterprise) level. How do MNEs adapt to the 09/11 - type risk in strategic management that shapes choices made for internationalization and for international business operations? It is observed that MNEs increasingly enlarge the notion of political risk. We suggest the development of a strategic risk assessment that incorporates terrorism which in its threat, event and aftermath does not remain local or national, but influences investment, location, logistics, supply-chain and other performance- linked decisions of the international value chain through an enlarged risk-return evaluation. Using the OLI- paradigm as a typology, we extend Dunning's work by incorporating the terrorism dimension. We do so mainly through the analysis and distinction of the most vulnerable links in firms' value chain in which adjustments need to be made in the face of terrorism threat, act and aftermath. This paper attempts to improve the understanding of international management in an era of global risk and uncertainty.

SOME DEFINING DIMENSIONS

Terrorism has been with us since time immemorial. It is mentioned in the bible and was a characteristic of the Roman Empire (Morris/Hoe, 1987; Schlagheck, 1988). Bernard Lewis, a Princeton scholar, suggests that already in twelfth century Persia, Hasan ibn-al-Sabbah emerged as a prime terrorist (Vick, 2004). This herbalist led the sect of the hashshashin, which engaged in ritual smoking and battled the crusaders for control of the Holy Land by making fear a weapon in itself (Lewis, 2003).

However, since 09/11, terrorism has become more global (Schneckener, 2002); by coming to U.S. shores, it presents much closer proximity to western civilization and through its more wide spread visualization it demands more of our attention. Contemporary terrorist activities share a number of common features which are inter-related and of a recently resurrected nature: the increasing dominance of religious motivation, modern business-like leadership structures, asymmetric warfare, and the use of victimization as a communication strategy.

Contemporary terrorism emerged in the late 1960s and is a complex, emotionally powerful phenomenon that challenges scholarly efforts aimed at its definition and conceptualization. A range of subjective interpretations has appeared in the literature, often driven by political rather than scientific purposes, but in 1996 Laqueur still notes the lack of a comprehensive, detailed definition. The phenomenon is often subsumed under political risk, guerilla warfare, and criminal activity. Its ends may even be considered legitimate by some audiences around the world.

Most definitions of terrorism converge around the notion that violence, or the threat of violence, is employed to frighten or intimidate people. Fear and threat exerts pressures on governments, populations and organizations that may help terrorists achieve goals that are unrelated to the violence itself. Alexander, Valton and Wilkinson (1979, p. 4) define terrorism as "the systematic threat or use of violence to attain a political goal or communicate a political message through fear, coercion, or intimidation of particular persons or the general public." Witschel (2004) adds a specific focus against non-combatant targets which we expand by excluding attacks on armed forces.

09/11-type terrorism adds a particular dimension to the management of the international value chain, because it exceeds the mere internationalization of previously- known forms of terrorism on a number of counts: The aim is not simply to overthrow a government or an occupying power, "but to destroy a form of society and eliminate a way of life" (Aznar, 2004). The terrorist ideology and membership are transnational per definition. …

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