Does Terrorism Cause Poverty? Or the Reverse?
(With Valbona Zeneli and Gary Knight)
In light of the limited empirical research of terrorism effects on the international activities by firms, we undertook a two-phased exploratory investigation. First, we conducted qualitative interviews with internationally active firms on terrorism to develop a broad understanding of what companies and managers see as the key salient issues. We also conducted discussions, generally 45 to 60 minutes in length, via telephone and at company sites, with senior managers of nine firms with extensive international operations. These interviews provided a clearer picture of managers’ concerns about and response to terrorism and facilitated the creation of a survey used in the second phase of our research.
Respondents worried about interruptions of supply chains, distribution channels, and logistics due to terrorism. Concerns also focused on the trustworthiness and reliability of foreign suppliers and intermediaries exposed to terrorism. Attention also rested on corporate capabilities that allow firms to prepare for potential disruptions and delays due to terrorism, and keep resources available to protect from and counteract terrorism.
The second phase of our research was an online survey of a sample of international firms headquartered in the United States but active in many countries around the world. The survey aimed to validate earlier findings, to better understand perceptions about terrorism, and to assist with the planning and responses that managers are undertaking when confronted with terrorism.
The unit of analysis was the firm. For standardization purposes, company resources were assessed as “annual revenues per employee,” where total annual revenues were divided by number of employees for each firm. We used five-point Likert scales.
In internationalizing firms, it appears that the threat or occurrence of terrorism is associated with immediate increases in international marketing costs and with disruptions in international supply chains. Management becomes likely to include terrorism as a detrimental factor in international marketing planning, and in the design of global distribution channels.
Finally, the more resources held by the firm, the more willingly terrorism and its repercussions will be recognized. The trend appears to be that particularly among informed and wealthy firms a terrorism presence creates early and significant corporate responses. Terrorism seems to be a key causal factor in fomenting poverty much more so than poverty-creating terrorism.
A significant insight!