International Risk and Perceived Environmental Uncertainty: The Dimensionality and Internal Consistency of Miller's Meas
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*Steve Werner (Ph.D., University of Florida) is an assistant professor in the Department of Management at the University of Houston. His research has appeared in the Academy of Management Journal, Journal of International Business Studies, Journal of Applied Psychology, Journal of International Management, Columbia Journal of WorldBusiness, and International Business Review, among others. **Lance Eliot Brouthers (Ph.D., University of Florida) teaches in the Division of Management and Marketing at the University of Texas at San Antonio. He has published in many refereed journals including: Long Range Planning, International Business Review, Columbia Journal of WorldBusiness, Journal of International Management and Journal of International Business Studies. ***Keith D. Brouthers (DBA, U.S. International University) is an assistant professor of Strategic Management at Vrije Universiteit, Amsterdam, the Netherlands. Wewish to thankDean JamesGaertnerand the Collegeof Business,Universityof Texasat San Antonio, for generouslyprovidingresearchsupportfor this project. Received:August1995;Revised:January& May 1996;Accepted:May 1996. 571
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JOURNAL OF INTERNATIONALBUSINESS STUDIES, THIRD QUARTER 1996
INTRODUCTION Firms commonly find international business opportunities to be inherently more risky than domestic ones [Ghoshal 1987; Miller and Bromiley 1990; Vernon 1985]. In "going global," firms all too often encounter new types of risk and by doing so, incur costs they would ordinarily avoid in a domestic setting. These costs might include insurance premiums to protect property from nationalization [Howell and Chaddick 1994], or costs for physical security measures to protect property and people against kidnapping, sabotage, or terrorism [Harvey 1993]. International risk may also affect performance through losses due to government actions [Makhija 1993]. These actions can include expropriation of firm assets [Minor 1994] or enactment of legislation that restricts the actions of the firm, such as instituting import or export restrictions like the 'voluntary import quotas' imposed on Japanese auto manufacturers in Europe [Mason 1994]. However, the most common risk firms face in the international marketplace is that of dealing with differing national currencies. This exchange-rate risk can create losses in otherwise profitable operations when a currency is devalued [Luehrman 1990]. Most of the researchersexamining risk have limited their examination to only one risk area at a time [Howell and Chaddick 1994; Campa 1994; Agarwal and Ramaswami 1992; Kim and Hwang 1992; Bonaccorsi 1992; Luehrman 1990]. However, according to more recent research, given the large number of different types of international risks, actions taken to avoid one type of risk, such as exchange-rate risk, may actually increase exposure to another type of risk, such as political risk [Brouthers 1995;
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