A Note on the Managerial Relevance of Interdependence
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INTRODUCTION
Concepts of interdependence vary considerably from author to author depending upon the particular purposes of the analysis. The concept that is most relevant in a managerial setting is similar to the vertical interdependence concept employed by Rosecrance et al. [1977]: There are two different concepts and two sets of measures of interdependence. The size of the transactions between two societies is horizontal interdependence... Vertical interdependence, in contrast, shows the economic response of one economy to another, in terms of changes in factor prices... High horizontal interdependence is the necessary (but not sufficient) condition of high vertical interdependence(pp. 428429). There should be one modification, however. Rosecrance et al. deal only with interdependence that has positive effects in the same direction, whereas the present paper integrates their treatment with the approach taken by Keohane and Nye [1977], who do not limit interdependence to situations of mutual benefit. As will be seen, the cases of negative interdependence carry, in fact, particular relevance for the managerial decision-maker.
Interdependence
To set the stage for the managerial interpretation of interdependence it is useful to consider briefly the strategic decision-making activities of the typical international manager, particularly in marketing, who must determine at what point interdependence enters. The proposition here is that interdependence serves as an indicator of the risk trade-offs that are possible between several countries. Generally, the figures generated by the decision-maker when dealing with the marketing problems represent very uncertain quantities. Not only do sales projections of any market involve economic uncertainties, for example, but when foreign markets are analyzed, political risks need also be taken into account. Under some circumstances it might be possible to ignore these complications and simply compare
The Managerial Problem
*Johny K.Johansson is Professor of Marketingand InternationalBusiness at the Graduate School of Business Administration, University of Washington, Seattle. His research has centered on econometric applications in marketing,and he is currentlystudying Japanese marketing strategies. Professor Johansson has published extensively in statistical and marketingjournals and has given seminars to executives and business students in many countries, including Japan, India,Hong Kong, and Sweden. He is on the editorial board of the Journal of MarketingResearch. Journal of International Business Studies, Winter 1982
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different countries' expected sales figures as if they were known for a fact. In other cases-notably where the decision-maker is risk averse-the uncertainty of each country's projected future sales figure will directly affect his choice. In risk averse cases a market with a lower, but more secure,
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