Coping with Uncertainty in International Business
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INTRODUCTION
To answer this question, a study was undertaken to: 1. find out what methods firms are using to cope with an uncertain international business environment; and 2. develop a framework of analysis that managers could use in choosing a method for coping with uncertainty.
Purpose of the Study
*Briance Mascarenhas is Assistant Professor of InternationalBusiness and Business Policy at the Jesse H. Jones Graduate School of Administration,Rice University.His teaching and research interests are in international business and business policy. The author is much indebted to Professor Richard H. Holton of the Universityof California, Berkeley, for help in developing the concept. Journal of International Business Studies, Fall 1982
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Because the research was exploratory it was felt that an in depth study of a few METHODOLOGY firms would capture richer information than a large-scale mail survey. Obviously, what is gained from such an approach in terms of a fuller understanding of a few firms has to be traded off in terms of generalizability [Duncan 1979; Morgan and Smircich 1980]. On balance, however, it was felt that an exploratory effort was a necessary precursor to testing a more rigorous hypothesis. Ten multinational companies covering a broad spectrum of industries were selected for the study. Access to executives and a requirement for greater international involvement than simply exporting were important criteria for including a company in the study. The industries from which the 10 companies were drawn are shown in Table 1. Interviews were completed with 25 top executives and 5 staff analysts who were in charge of planning and monitoring international projects. The titles of the top executives ranged from Executive Vice-President to Project Director. All those who were interviewed had substantial first-hand international experience, were aware of internationalbusiness uncertainties, and made some contributionto the design of the strategic internationalinvestments about which they were interviewed. Prior to the interview, a letter was sent to each executive involved in the study. The letter explained the general area of the study and included the following questions to help the interviewees collect their thoughts before the interview: With regard to a recent international project with which you have been involved, what were the different sources of uncertainty? What methods were used to cope with these sources of uncertainty? Each interview was conducted in an unstructured format and lasted, on the average, 1 hour and 30 minutes. The interviewee was asked initially to provide some general background about and the reasons for undertaking the project; then the two questions were used to guide the discussion. To provide a common framework of analysis, executives were asked to comment in particular about political, foreign exchange, input, production, a
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