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The role of uncertainty and risk in the decisions which international business firms make on the internationalisation process

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  1. Introduction
  2. About international business firms
  3. The role of uncertainty and risk in the decisions which international business firms make on the internationalization process
  4. Conclusion

Uncertainty is what drives the business environment. Without uncertainty, there would not be entrepreneurship nor need for firms to develop, explore and evolve. But, with uncertainty comes risk and companies try to maximize their profits while minimizing the underlying risk of their activities. When developing a framework for integrated risk management, Miller (1992) identified three main sources of uncertainty: the general environment (political, fiscal and monetary, macro-economic), the industry (input market, product market, competitive) and the firm itself (operating, liability, R&D, credit, behavioral). Because firms can more easily monitor and manage risk inherent to their internal uncertainty, the external environment is the major concern in the internationalization process. The main sources of uncertainty in the external environment can be detailed following the PESTEL framework: Political (role of governments), Economic (macro-economic factors), Social (cultures and demographics), Technological (innovations), Environmental (?green? issues) and Legal (legislative constraints). These factors are highly influential and shape international markets in various ways and models to quantitatively assess markets and countries attractiveness based on their related uncertainty have emerged.

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