Government Intervention in the Venezuelan Petroleum Industry: An Empirical Investigation of Political Risk
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JOURNAL OF INTERNATIONALBUSINESS STUDIES, THIRD QUARTER 1993
consider in greaterdepth how the decision is made to intervenein a particular manner in multinational firms, including the reasons behind intervention and the use of specific types of intervention; and, (b) to gain insight into the timing of the intervention. Although the topic of political risk analysis has been advanced in recent years, little light has been shed on the natureof intervention or on the timing of intervention, both important aspects of political risk analysis. In this regard, the work is still exploratory in a number of ways. Poynter [1985], when comparing patternsof government intervention in different countries, noted that a host governmenttypically does not intervene in a similar manner in different firms or industries. His finding that the incidence and type of intervention varies among firms and industries suggests that it would be useful to undertake a detailed investigation of intervention at the firm or industry level. A review of the literatureshows that this aspect has received limited attention. Although several studies have illuminated the connection of important factors to expropriation [Bradley 1977; Hawkins et al. 1977; Jodice 1980; Kobrin 1980], other less dramatic but more frequent types of interventionshave not been examined as much. The studies thathave investigated other interventions have found evidence consistent with Poynter [1985], since they reportthat certain firm- and industry-relatedfactors affect intervention [Ghadar 1982; Jones 1984; Kim 1987, 1988; Lecraw 1984; Phillips-Patrick 1989].2 However, these studies do not differentiate between types of interventions;therefore,the reasons why host governments intervene in different ways or at specific times have not been explored. There remains at this time a need to explain the circumstances that lead to specific types of intervention in targeted multinationalfirms and the timing of their occurrence. The conceptual model of government intervention developed in this research addresses these issues. The premise of the model formulatedhere is thathost government intervention is related to the information that the government has on firm operations. The host government is believed to pursue specific objectives with respect to multinational firms, either individually or collectively across an industry. Whenever information relative to these objectives suggests to the government that the objectives are not being furthered,the government is motivated to intervene. The manner in which it intervenes (or the type of intervention) is directly related to the desired objective.3 These objectives may be of an economic, social or political nature. In order to examine this process, this research undertakes a study of a range of host government interventions in multinational firms within a single industry. In particular
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