Strategies for political risk mediation by international firms in transition economies: the case of Bulgaria

As foreign investors have entered the transition economies of central and eastern Europe, they have had to deal with significant political turbulence and ambiguity. To create an environment that is more amenable to their businesses, the investors have pursued political risk management strategies. An analysis of those strategies in Bulgaria was undertaken on the basis of in-depth case-study research of American Standard, Metro Cash&Carry, and the Bulgarian International Business Association (BIBA), which represents many international firms in regard to political risk management in Bulgaria. The analysis shows that companies are pursuing two strategies-a low involvement strategy, in which companies, often working as part of a consortium, devote limited resources to mediation of a narrow set of political concerns, and a high involvement strategy, in which companies develop a diverse network of government, business, and public partners who can help them to mediate the political environment broadly. Investment intensity, a possible explanation of the different choice of strategy is considered. (C) 2003 Elsevier Inc. All rights reserved.