States and Companies

Because political events can determine the success or failure of an investment abroad, transnational companies must make every effort to analyze political risks as part of the decisionmaking process. States and Companies, written especially for students of international business and executives of transnational companies, presents a conceptual framework for the analysis of political risk. Although the author focuses his study on the international oil industry, his explanatory model of political risk is applicable to most transnational companies. Lax's study is important because it focuses on developing a context for understanding political risk rather than simply offering a predictive methodology. He provides the theoretical groundwork for this understanding by explaining political risk in terms of a broader theory of interaction between host states and transnational corporations. The inherent conflict of interests and issues hierarchies between these two actors, Lax argues, is the root cause of political risk.

?Lax attempts to develop a theoretical foundation for understanding the political risks that face transnational companies (sometimes also referred to as multinational or international corporate entities) in their worldwide operations. The author takes his material primarily from the histories of international oil companies and relevant government documents. In the author's scenario there are two sets of actors--the transnational corporations and the host state or states in which the corporation operates. The author examines the conflicts arising arising between these two entities because of differing goals and policies. Lax attributes part of the conflict to the Western intellectual tradition-- a tradition that separates politics from economics, going back to the writings of Adam Smith in the 18th century. For the host state, politics is the supreme element. Intially, host states mainly desire stability within their territories; thus transnational corporations tend to obtain good conditions for their new operations, which may take years to become profitable. By that time the host state has usually achieved stability and can make stronger demands on the transnational corporation. Thus the bargaining power of the corporation becomes weaker, as occurred in the oil industry first in Latin America and later in the Middle East. . . . The book is an improvement on the existing corporate political-risk literature. University collections.?-Choice, "Lax attempts to develop a theoretical foundation for understanding the political risks that face transnational companies (sometimes also referred to as multinational or international corporate entities) in their worldwide operations. The author takes his material primarily from the histories of international oil companies and relevant government documents. In the author's scenario there are two sets of actors--the transnational corporations and the host state or states in which the corporation operates. The author examines the conflicts arising arising between these two entities because of differing goals and policies. Lax attributes part of the conflict to the Western intellectual tradition-- a tradition that separates politics from economics, going back to the writings of Adam Smith in the 18th century. For the host state, politics is the supreme element. Intially, host states mainly desire stability within their territories; thus transnational corporations tend to obtain good conditions for their new operations, which may take years to become profitable. By that time the host state has usually achieved stability and can make stronger demands on the transnational corporation. Thus the bargaining power of the corporation becomes weaker, as occurred in the oil industry first in Latin America and later in the Middle East. . . . The book is an improvement on the existing corporate political-risk literature. University collections."-Choice

HOWARD L. LAX is a research professional with a diversified background in both academic and business settings who is currently senior vice president and chief operating officer of Trans Data Corporation, a market research firm specializing in the financial services industry. Dr. Lax has done extensive research in the field of political risk and international oil politics, both academically and professionally. He has published numerous articles and books on topics in international politics, political economy, and political risk. He taught political science at the City University of New York and has worked as a consultant in the field of mineral economics.