Political event analysis using group support systems

Technological Forecasting & Social Change 69 (2002) 153 – 172

Political event analysis using group support systems Robert W. Blanninga, Bruce A. Reinigb,* a

Owen Graduate School of Management, Vanderbilt University, Nashville, TN, USA Department of Information and Decision Systems, College of Business Administration, San Diego State University, San Diego, CA 92182-8234, USA

b

Received 11 May 2000; received in revised form 17 August 2000; accepted 22 August 2000

Abstract Corporate and public sector managers often look to futurists for help in forecasting changes in their internal and external organizational environments. Futurists use techniques such as the Delphi method and scenario development to identify possible futures, often consisting of events and trends, occurring both globally and within a specific geographical region. As corporations expand into global markets, they become vulnerable to political events occurring in specific regions such as expropriation of assets, the imposition of currency controls, and targeted taxation. In analyzing the risk associated with these events, it is often useful to call on the opinions and judgments of knowledgeable persons closest to the events. Yet some of these persons may be reluctant to discuss their opinions openly. Therefore, it may be helpful to allow them to discuss issues among themselves under conditions of mutual anonymity. Group support systems (GSS) allow groups to conduct such discussions. We present a two-part methodology for analyzing political events using GSS, one to be used for an initial analysis and the other for a follow-up comparison. We then demonstrate our methodology by applying it to Hong Kong (1) before its reunification with the People’s Republic of China (PRC) and (2) after the reunification. D 2002 Elsevier Science Inc. All rights reserved. Keywords: Risk analysis; Political risk; Political event; Group support systems

1. Introduction Corporate and public sector managers often look to futurists for help in forecasting changes in their internal and external organizational environments. Futurists use techniques * Corresponding author. Tel.: +1-619-594-3032; fax: +1-619-594-3675. E-mail address: [email protected] (B.A. Reinig). 0040-1625/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved. PII: S 0 0 4 0 - 1 6 2 5 ( 0 0 ) 0 0 11 4 - 1

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such as the Delphi method and scenario development to identify possible futures, often consisting of events and trends, occurring both globally and within a specific geographical region. Examples of global forecasts include advancements in communication technologies, emancipation of women, lengthened human life spans [1,2], and economic liberalization [3]. Examples of regional forecasts include information technology advancements in India [4] and Korea [5], the use of alternative energy sources in the UK [6] and the US [7], and economic progress in Mexico [8] and Russia [9]. Regional forecasts may be especially critical when there exists a political element to the events or trends under consideration. Managers making investments or conducting operations in foreign countries must often consider the political risks associated with these investments or operations. In order to evaluate these risks, it is sometimes necessary to obtain the frank opinions of knowledgeable persons closest to the events. However, in many countries, outspoken criticism of political actors or institutions is itself a risky venture. In some of these countries, political repression is accompanied by economic stagnation, and they are of limited interest to multinational executives. But in others, many of them in East Asia and the Middle East, economic opportunities take place in a politically restrictive environment. When the political environment is changing, or could easily change, it is important to assess the likelihood of any changes and their possible business impact. Although the changes can be either beneficial or detrimental, they are most often of interest when they are detrimental, and they are collectively called ‘‘political risk.’’ Political risk has been defined as ‘‘. . . the possibility that political decisions, events, or conditions in a country, including those that might be defined as social, will affect the business environment such that investors will lose money or have a reduced profit margin [10].’’ Political risk is also defined by comparison with other risks. That is, businesses face (1) physical risk, such as fires and floods; (2) market risk, such as that resulting from product markets, raw material markets, and labor markets; (3) economic risk, such as an unanticipated inflation or recession; and (4) political risk. These risks may interact. Physical disasters may make a company more vulnerable to economic downturns, and vice versa. An undesirable political environment may increase a company’s vulnerability to other risks, and vice versa. Companies wishing to invest in a country, to establish a local sales office, or to use a country as a gateway to another country must estimate the risk of political events and their likely impact on the firm. Many companies have established internal functions with this responsibility, in some cases on an ad hoc basis and in some cases as an ongoing part of the corporation’s strategic planning function [11,12]. Organizations such as Business Environment Risk Intelligence, Political Risk Services, and the Economist Intelligence Unit have been established to provide such services as well [13]. These organizations publish general indexes of political risk as well as more specific estimates of the likelihood of such events as political instability and restrictions on investment and trade. The persons who prepare political risk estimates use a variety of approaches [14–16]. These include quantitative techniques such as checklists, trend extrapolation, and simulation modeling. Another approach is to elicit expert opinion and to summarize it in the form of forecasts and scenarios. This may be done by means of interviews, surveys, and the Delphi method [17–20]. The experts whose opinions are solicited may include analysts employed by

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the organization performing the analysis and also external persons such as diplomats, journalists, academics, business executives, and political leaders. In the Delphi method, questionnaires are repeatedly sent to specialists, who are presented at each stage with a summary of the results of the previous stage (e.g., Refs. [4,5,21–23]). The objective of a Delphi is to uncover areas of agreement and disagreement among participants and the iteration is carried out until stability, a small change from one round to the next, is achieved [24]. This usually requires three to four rounds of questionnaires and typically results in a unimodal, bimodal, or flattened distribution. Analysts have estimated the political risks associated with countries, industries, and individual events. We will focus on the latter. By political event, we mean a possible occurrence or change that would be of importance to multinational firms and whose likelihood is unknown. Examples of political events are violent events such as war and civil strife, general restrictions such as embargoes and currency inconvertibility, and targeted actions such as nationalization and expropriation. Examples include the floating of the Thai baht and civil unrest in Indonesia. Political event analysis consists of determining the likelihood of occurrence or degree of change of these events and their impact on the well being of the organization. Political event analysis requires the integration of the opinions and judgments of knowledgeable persons closest to the events. Techniques such as interviews, surveys, and the Delphi method have been used for this purpose. It would be useful for these persons to conduct a group discussion in which they exchange their opinions and ideas but these techniques do not allow them to do so. Yet some of these persons may be reluctant to discuss their opinions openly in a face-to-face meeting. However, there is a technology, group support systems (GSS), which allows participants to exchange opinions anonymously and vote on issues all in a single group session. We have developed a method for using GSS to analyze the risk of political events, and we have applied it to an analysis of the future of Hong Kong. We then demonstrate our methodology by applying it to Hong Kong (1) before its reunification with the People’s Republic of China (PRC) and (2) after the reunification.

2. Group support systems In October 1992, the US Department of Defense encountered difficulties when it set out to consolidate its procedures for managing hazardous substances. Each branch of the armed services had its own procedures in place. In order to arrive at a common system, it was necessary for managers from the separate services to work together and set aside institutional rivalries. A group of 24 representatives from the Defense Logistics Agency, Army, Navy, Air Force, and Marine Corps were given the task of designing the new system. They decided to support their meeting with a GSS in which each participant was seated in front of a personal computer. The computers were networked such that participants could enter comments anonymously and simultaneously and also read and respond to comments entered by other participants. Because participation was anonymous, representatives of the Army, for example, were able to disagree with their Army colleagues and to agree with Marine and Navy

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representatives if they felt it to be appropriate. As a result, they were able to develop a simplified system that was accepted by all branches of the armed services [25]. This is one example of many applications supported by GSS in a variety of private and public organizations. These applications include budgeting, financial planning, scheduling and logistics, and market research. GSS have several software tools to support these applications. The two major ones are discussion tools and voting tools. Discussion tools allow participants to enter comments into discussion windows, which can then be accessed by the other participants. The person entering the comment is not identified. Participants can interact with each other by responding to each other’s comments. Voting tools allow participants to enter numerical estimates such as probabilities and preferences, which are then summarized and displayed by the system. Discussion and voting are both anonymous. Users cite three principal advantages of GSS: 





Anonymity: participants can express their ideas candidly. This allows participants to focus on the merit of the ideas presented rather than organizational politics [26,27]. Studies have shown that anonymity may lead to an increased frequency of critical comments [28–30]. Simultaneity: participants can enter their comments simultaneously and respond to the comments of others. Studies have shown that GSS groups can outperform face-to-face groups on idea generation tasks because participants do not have to wait for a turn to speak and can increase their interaction with other members [31,32]. Documentation: the discussion is recorded (with anonymity preserved) for subsequent processing and analysis [33].

However, GSS require the participants to type their comments and also require that necessary hardware, software, and staff support be available. Therefore, they are useful when there is a pressing need for anonymity, simultaneity, and documentation [34,35]. Such a situation arises in political risk analysis whenever knowledgeable participants are reluctant to discuss their opinions openly [36,37]. It is critical, especially in politically repressive environments, that the GSS being used provides assurances that anonymity is not being degraded. Even in the US where personal privacy is a widely held cultural value [38], employee monitoring in general, and the monitoring of computer-mediated communication in particular, is on the rise [39,40]. Intercepting computer transmission over networks requires fairly basic technology, such options include network, keyboard, and computer screen monitoring software [41,42]. When GSS sessions are conducted in regions with extremely authoritarian regimes, participants may simply not trust anonymity or feel that the downside risk of discovery is too great to participate forthrightly. Even when there is no interception of computer transmission, participants may still be concerned that other participants can identify them, especially when the group size is small and the participants know each other well [43]. However, empirical studies have shown that participants in groups similar in size to the ones used in this study can seldom correctly identify the source of comments, even when they know each other well [44].

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We will now describe two uses of GSS in political event analysis. We illustrate each with an application to the political future of Hong Kong, an initial analysis conducted in April 1997 and a subsequent analysis conducted in April 1999. In both cases, we used GroupSystems, a GSS developed by Ventana, which is one of several commercially available GSS.

3. Initial analysis Organizations are often faced with a number of political events that may change in the future. The change can be favorable or unfavorable and the events themselves have varying degrees of importance to the organization. Political event analysis consists of determining the likelihood or degree of change of these events and their impact on the well being of the organization. We refer to the likelihood or degree of change in an event as the change index of that event. We refer to an event’s impact on the well being of the organization as the importance of that event. There are two conditions under which a political event analysis may be conducted. First, the analysis may be performed for the first time, with no history of previous analysis. We will call this an initial analysis. Second, the analysis may have been performed previously and is being performed again to provide the latest information. We will call this a subsequent analysis. A subsequent analysis will include not only current estimates of change index and importance but also a determination of how these estimates have changed since the previous analysis. In this section, we present a methodology for conducting an initial analysis. We then illustrate this with an analysis of political events in Hong Kong that we conducted in April 1997, prior to Hong Kong’s reunification with the PRC. In Section 3.1, we will present a methodology for conducting a subsequent analysis, and we will illustrate it with an analysis conducted in April 1999. 3.1. Methodology We now present a methodology for using GSS to analyze political events. This process will take place in four steps as described below and illustrated in Fig. 1. 3.1.1. Step 1: Identify political events Events are identified by examining the relevant literature, such as books, periodicals, and reports, and by talking to experts, such as business executives, journalists, and academics. The organization conducting the study will select the events of greatest importance to that organization. 3.1.2. Step 2: Have the participants discuss the events Participants use the GSS to comment about two attributes of each event: (1) whether it is likely to change over the next 5 years and (2) whether the event is important to

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Fig. 1. Methodology for initial analysis.

multinational business firms. Each event is presented in a separate discussion window with the following heading: Please consider {Political Event of Interest} over the next five years. Is it likely to change and is it an important issue to {The Organization Conducting the Study}?

The participants will enter their own comments and where appropriate, respond to the comments of other participants. These comments will be summarized in viewpoints as explained in Step 4 below. 3.1.3. Step 3: Have the participants vote on the events Participants use the GSS to vote on two attributes of each event: (1) the likelihood or degree of change during the next 5 years and (2) its importance to the organization conducting the study. These are the change index and the importance, respectively. In the software that we used (discussed below) voting was done on a scale from 1 to 10. Futurist studies often use a 10-point scale [2] or a 100-point scale [21] to measure the importance and the likelihood of events. The voting items are as follows: 

Change index. There are two kinds of events and the interpretation of the change index differs for each. 6 The current status is the most favorable an event will become and therefore is assigned a value of 1. A 10 represents an extremely unfavorable change. For example, if there is little censorship of political commentary, then the only change we might consider would be one in which censorship increases. 6 The event could become more favorable than it is currently and is assigned a value of 1, or the event could become less favorable than it is currently and is assigned a value of 10. For example, in many countries there is some

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degree of corruption and it could either increase or decrease. The change index is a property of the event itself and not of the organization conducting the study. However, the organization does determine whether a particular direction of change (e.g., a change in the level of censorship or corruption) will be considered favorable or unfavorable and assigns the direction of the scale accordingly.  Importance. A value of 1 means that the event has a very low impact on the well being of the organization and a value of 10 means that the event has a very high impact on the well being of the organization. The results of the voting will appear in the voting results and political event graph as explained in Step 4 below. 3.1.4. Step 4: Create deliverables There are three deliverables: voting results, political event graph, and viewpoints. In addition, the session data is stored for possible future use in a subsequent analysis.   

Voting results. This is a table containing the mean and standard deviations of the votes for the two attributes (change index and importance) for each event. Political event graph. This is constructed using the means of the votes of the two attributes (change index and importance) for each event. Viewpoints. After the session, participant comments are aggregated into viewpoints. A viewpoint is an attitude, opinion, or position about the aspect of the event. It appears as a brief statement summarizing the attitude, opinion, or position and is typically accompanied by sample discussion comments from which it was constructed. Some of the comments, and therefore some of the viewpoints, may contradict each other. The aggregation of comments into viewpoints will depend on the judgment of the person conducting the political event analysis.

The deliverables can be used to analyze the events both individually and collectively. The information relevant to the individual events is (1) the mean and standard deviation of the change index and importance, taken from the voting results, and (2) the viewpoints concerning the likelihood of change and importance of the events. The political event graph tells us the position of the individual event (e.g., the event may have a high change index but low importance) and provides a comprehensive view of all of the events. However, since the meaning of the change index differs for each event, the political event graph should not be used to make comparisons between pairs of events. 3.2. An example: Hong Kong, April 1997 In April 1997, the British Dependent Territory of Hong Kong was preparing to become a Special Administrative Region (SAR) of the PRC. There was no end to speculation, especially by Western journalists and academics, about the future of the SAR. Some argued that it had a bright future, because its close integration with the remainder of the PRC would

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provide many business opportunities and the PRC leaders had a powerful incentive to maintain the viability of the SAR as a gateway to other parts of the world, and especially to the West [45]. Others argued that the PRC’s ‘‘one country, two systems’’ policy was unworkable and that the SAR would eventually come to resemble the remainder of the PRC, in both political freedoms and economic restrictions [46,47]. When making decisions in a politically uncertain environment, local knowledgeable persons sometimes have better information or are better at interpreting the information that is available [48–50]. However, many people in Hong Kong were reluctant to discuss their views openly. For example, journalists were often practicing self-censorship when it came to making critical comments about the impending handover to the PRC [51], and participants in public opinion polls were refusing to comment on politically sensitive subjects [52]. In addition, business executives were increasingly unwilling to support the British colonial administration in its disputes with the PRC over the future governance of Hong Kong [53]. Table 1 Voting results (1997), voting results (1999), and statistical comparison (1997 to 1999)

The use of English (change index) The use of English (importance) The tax rate (change index) The tax rate (importance) Independence of judges and courts (change index) Independence of judges and courts (importance) Special treatment for SOEs (change index) Special treatment for SOEs (importance) Censorship of political commentary (change index) Censorship of political commentary (importance) Hong Kong dollar peg to the US dollar (change index) Hong Kong dollar peg to the US dollar (importance) * P < .05. ** P < .001. *** P < .0001.

Statistical comparison (1997 to 1999)

Voting results (1997) (n = 72)

Voting results (1999) (n = 54)

Mean

S.D.

Mean

S.D.

6.71

1.39

5.30

2.28

4.03***

8.10

1.79

8.76

1.44

2.23*

3.67 7.68 7.14

2.30 2.27 1.54

3.81 7.76 6.39

2.33 2.11 2.11

0.36 0.20 2.21*

7.78

2.31

8.39

1.85

1.60

6.83

2.21

5.11

2.40

4.17***

6.43

2.47

7.50

2.66

2.33*

7.89

1.95

6.46

2.20

3.84**

5.58

2.45

6.33

2.64

1.64

5.09

2.69

6.37

2.21

t tests

MANOVA

t value

Wilks’ Lamda

F value

0.85

10.97***

1.00

0.08

0.94

4.20*

0.86

10.41***

0.87

9.39**

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This reluctance to debate political issues openly suggests that GSS may be useful in helping analysts to stimulate and analyze discussions among knowledgeable persons who might not otherwise be willing to engage in such discussions. In April 1997, 6 weeks prior to the transfer of sovereignty to the PRC, 72 Hong Kong executives were divided into four groups and participated in initial analysis sessions, each lasting approximately 60 min, consisting of 45 min of discussion and 15 min of voting. The executives worked for multinational corporations, had an average of 7 years work experience, and were natives of Hong Kong. 3.2.1. Step 1 To illustrate our methodology, we selected five events that were of concern at the time: 

A change in the use of English in Hong Kong. There was recognition that Hong Kong needed to maintain or increase English fluency among its citizens, but there was concern that the quality of English may decline after the handover [54].

Fig. 2. Political event graph (1997).

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A change in the tax rate. Some observers suggested that the new Hong Kong government might increase taxes to fund an increase in social services [55]. A change in the independence of judges and courts. There was concern that the PRC would intervene in the judicial system of Hong Kong [47,56]. Special treatment for PRC state-owned enterprises (SOEs) doing business in the SAR.

Table 2 (a) Viewpoints and sample comments regarding the likelihood of censorship of political commentary increasing over the next 5 years (1997) Viewpoint 1: Political censorship will increase in Hong Kong during the next 5 years. However, this censorship will be much less restrictive than is currently the situation in China because (1) the Hong Kong government is unable to enforce censorship and (2) political changes in China will demand less censorship (4 of the 17 supporting comments are presented below). ‘‘Yes, but there might be more room for free speech that we thought. Slowly but surely, China is changing too not just in the freedom of speech but also in many other areas.’’ ‘‘I think certain degree of political and speech freedom may be maintained, but not comparable as what we have today!!’’ ‘‘Definitely there will be more censorship. However the situation might be less acute in HK than in China. Given the current free flow of information in HK, it is quite difficult to have a control.’’ ‘‘That may happen but the way they do may not be easily to detect with the advancement in IT side.’’ Viewpoint 2: Political censorship will increase in Hong Kong but it will be in the form of self-censorship by the press rather than government enforcement (5 of the 14 supporting comments are presented below). ‘‘Definitely. Newspapers in HK are already practicing self-censorship. They are refraining from making sharp criticism of the Chinese government! Only a few brave ones are continuously critical of the government and they are dwindling in number.’’ ‘‘Already increase. There’s a saying that some Hong Kong people are more left than the people from mainland. Now, it’s the newspaper’s editor who do the censorship for us.’’ ‘‘I would say most of the HK newspapers have their own censorship system now. Newspapers like Oriental Daily have ‘suddenly’ become pro-China in recent months.’’ ‘‘Agree, there are lots of examples already, e.g., Apple Daily cannot get an underwriter for their listing.’’ ‘‘True, look at those self-censored newspapers. Perhaps one day we can only buy Tai Kung or Wen Hui from newsstand.’’ Viewpoint 3: Political censorship already exists in Hong Kong, well before reunification with China (three of the six supporting comments are presented below). ‘‘The censorship has started already for a long time. It will be really worse if the censorship continues to increase.’’ ‘‘Traces of evidence has already shown that censorship is now in force already, well before the handover.’’ ‘‘It seems that we don’t have to wait until the first year we can see it now.’’ Viewpoint 4: Political censorship will increase in Hong Kong due to direct intervention from China (four of the six supporting comments are presented below). ‘‘With China’s great concern for political stability, censorship must be top on the agenda.’’ ‘‘It will increase in the first few years because this is the tradition of Chinese officials to control people’s thinking. However, as China is getting open and due to international pressure, censorship should decrease again.’’ ‘‘It is especially true for the first few years after the handover. The political leaders in China may tighten the control so that people in HK have to get used to this sort of control.’’ ‘‘Yes, sure. We can estimate what will happen in the future by referring to the past. They must do so because they are socialists.’’



















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Table 2 (continued ) (b) Viewpoints and sample comments regarding whether or not it is important to MNCs that there is not censorship of political commentary increasing over the next 5 years (1997). Viewpoint 1: Political censorship is not important to multinational businesses because it does not interfere with the ability of Hong Kong to maintain a stable environment in which to conduct business (5 of the 16 supporting comments are presented below). ‘‘I think that for the multinational firms, so long as there is free flow of information and they can make money as usual, they may not be so concerned about the censorship of political commentary in HK.’’ ‘‘No, business people don’t concern about the politics. They only concern whether they can voice out any complaints about the business system and any Chinese intervention on the free market.’’ ‘‘It’s not all important as long as the multinationals obtain a fair business environment to do BUSINESS, not politics.’’ ‘‘Multinational firms will not care about the censorship, as long as HK is stable.’’ ‘‘Usually business people has less concern on politics, what they need is a stable political environment with a known set of rules.’’ Viewpoint 2: It is important to multinational business firms that there not be political censorship in Hong Kong because freedom of the press and freedom of speech ensure a stable environment in which to conduct business (4 of the 10 supporting comments are presented below). ‘‘Yes. They are not deeply interested in politics but are concerned about the freedom of speech/press/ advertisement and stability of the society.’’ ‘‘Business people always take political environment into consideration. How can do guarantee to have the goods delivery with a country at war. You have to add high insurance cost.’’ ‘‘Yes, as the investors may lose confidence in Hong Kong if there is no freedom of speech.’’ ‘‘Press freedom is the only way monitor the government. Nobody knows how will SAR government evolve. To ensure a fair competition and a responsible government, press freedom is vitally important.’’ Viewpoint 3: Political censorship is not important to multinational businesses because profit is the top priority of multinational businesses and political censorship does not interfere with profit-making (four of the seven supporting comments are presented below). ‘‘I don’t think this is a critical issue for multinational firms. They are here because of the tremendous opportunities in PRC whose economy is growing very fast and creating opportunities which cannot be found in the stable economies of their home country.’’ ‘‘I don’t think so. We can see that lots of multinational are doing business in China already. Business is business. Profit is most important.’’ ‘‘Agreed. Don’t think the multinational corporates do really care about this. They go where they can make the fortune. That’s all, simple. Or they will not go to China which is ‘well-known’ for her tight political censorship.’’ ‘‘For multinational corporates, fortune is the first priority. If it justifies for the risk of censorship and instability due to censorship, who cares?’’ Viewpoint 4: Political censorship is not important to multinational businesses in Hong Kong just as it is not important to multinational businesses in Singapore (four of the four supporting comments are presented below). ‘‘I agree. Just like Singapore which also has a tight control of political commentary, however, multinational business still go to Singapore as the govt. there is promoting a good economic environment for those companies to carry out business and ultimately making profit.’’ ‘‘Look at Singapore, MBF are still doing business there although there are effectively little freedom in political commentary.’’ ‘‘It depends. I think there is quite a lot censorship of political commentary in Singapore, but business firms still invest a lot there.’’ ‘‘What do MNCs care so much about political commentary in HK??? MNCs are aggressively investing in China, Singapore or Indonesia where there are only single official political parties.’’




















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Some observers suggested that financially troubled SOEs would be given special privileges in Hong Kong [57]. A change in censorship of political commentary. There was concern that a change in sovereignty would result in an increase in government censorship of political commentary, as well as self-censorship [47,57].

3.2.2. Step 2 The participants were presented with five discussion windows, one for each the five events. The questions appearing in the discussion windows are shown the Appendix. 3.2.3. Step 3 The participants anonymously entered values for the change index and importance each event on a scale from 1 to 10. The voting items and their scales are shown the Appendix.

of in

of in

3.2.4. Step 4 The voting results are presented as part of Table 1. The political event graph is presented in Fig. 2. The viewpoint for one of the five events, censorship of political commentary, is presented in Table 2a and b. In the political event graph, no points appear in the lower left quadrant. This is to be expected. Events in the lower left quadrant would have low change index and low importance and would therefore typically not have been selected for analysis to begin with. We note that censorship of political commentary is most likely to change unfavorably but is of least importance to multinational business firms, according to our participants. Increased taxes has by far the lowest change index. Participants thought that taxes were likely to remain low and that this was very important to multinational business firms. However, increased taxes, independence of judges and courts, and the use of English are all of similar importance to multinational business firms. The voting results and the viewpoints concerning censorship of political commentary reinforce each other in that they lead to similar conclusions in two respects. First, the viewpoints for the likelihood of censorship all agreed that censorship would increase. This is consistent with the mean value (7.89) of the change index, which suggests that most of the participants thought that censorship would increase. Second, there was some disagreement as to the importance of censorship (three viewpoints indicating importance and one indicating unimportance), whereas all four viewpoints concerning likelihood of censorship were in agreement. This is consistent with the fact that the vote on the importance of censorship had a higher standard deviation (2.45) than the standard deviation (1.95) of the change index ( F(71,71) = 1.59; P < .03).

4. Subsequent analysis In this section, we present a methodology for conducting a subsequent analysis. This can be used only if an initial analysis had already been performed. If so, the session data (Fig. 1) from

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the initial analysis will now be called the old session data and the data from the subsequent analysis will be called the new session data. There are two components to a subsequent analysis. The first component is very much like the initial analysis but it is based on current data from the GSS. This will result in three deliverables (voting results, political event graph, and viewpoints) for the current period along with stored new session data. The second component is a comparison of events for the previous period and the current period using the old session data and the new session data. After presenting a methodology for subsequent analysis, we illustrate it with an analysis of political events in Hong Kong that we conducted in April 1999, after Hong Kong’s reunification with the PRC and the Asian economic crisis. We then compare it with the initial analysis previously conducted in April 1997. 4.1. Methodology We now present a methodology for using GSS to analyze political events. This process will take place in five steps as described below and as illustrated in Fig. 3. Steps 1 through 4 are almost identical to those of the initial analysis in that they produce a political event graph, viewpoints, and stored (new) session data. Step 5 performs a comparison with the previous analysis and produces a comparison political event graph. Step 1: Identify political events. In addition to examining the literature and talking with experts, the organization conducting the study will also review the events contained in the

Fig. 3. Methodology for subsequent analysis.

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old session data. It is possible that some of the events from the previous session may be eliminated and that some new events may be added. Step 2: Have the participants discuss the events. Step 3: Have the participants vote on the events. Step 4: Create current deliverables. Step 5: Create comparison deliverables. There are two deliverables. One is a statistical comparison and the other is a change graph.  Statistical comparison. This is a table containing the following information for each event: 6 For each of the two attributes (change index and importance) of the event, the results of an independent group t test comparing the mean values from the two time periods are calculated. This test will show us whether there has been a significant change in the change index or the importance of the event. It is possible that there will be a significant change in both, in neither, or in one but not the other. 6 The results of a MANOVA comparing the two attributes (change index and importance) of the event for the two time periods are calculated. This will tell us whether the two attributes of the event, taken as a whole, has changed significantly. It is possible that neither the change index nor the importance has changed significantly, and yet the two taken collectively has changed significantly. . Change graph. As with the political event graph, the two dimensions are change index and importance. The graph contains two points for each event. The coordinates of the first point are the mean votes for each of the two attributes (change index and importance) from the previous session. The coordinates of the second point are the mean votes for each of the two attributes (change index and importance) from the current session. An arrow will connect the two points when the MANOVA results are significant. Events that are not in both the current and previous analyses do not appear in this graph. The statistical comparison allows us to examine changes in the change index and importance of individual events. If a particular event would affect a firm’s decisions, then it may be useful to know not only the current status of an event but also the direction of change. The change graph suggests whether an overall change has taken place — that is, whether the events have changed collectively and whether the political environment of the firm has become more or less favorable. 4.2. An example: Hong Kong, April 1999 On July 1, 1997 Hong Kong’s transfer of sovereignty from Great Britain to the PRC took place as expected. However, on the next day, the government of Thailand announced the floating of the Thai baht, which precipitated an economic crisis that spread throughout Southeast Asia. By the same time the following year, the Hang Seng Index had dropped to 50% of its pre-handover value. Concern about Hong Kong’s

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political future continued, but now there was also concern about its economic future [58–60]. In April 1999, 54 Hong Kong executives were divided into four groups and participated in subsequent analysis sessions, each lasting approximately 60 min, consisting of 45 min of discussion and 15 min of voting. The executives were different from the ones in the initial analysis, however, they worked for multinational corporations, had an average of 7 years work experience, and were natives of Hong Kong. 4.2.1. Step 1 We included the five events from the initial analysis, which were still of concern, and added an additional one: the fixed exchange rate between the Hong Kong dollar and the US dollar. There was concern that the Hong Kong government might remove the ‘‘peg’’ between the Hong Kong and US dollar in response to the Asian economic crisis [61,62]. 4.2.2. Step 2 The participants were presented with six discussion windows, one for each of the six events. The questions appearing in the discussion windows are shown in the Appendix. 4.2.3. Step 3 The participants anonymously entered values for the change index and importance of each event on a scale from 1 to 10. The voting items and their scales are shown in the Appendix. 4.2.4. Step 4 The voting results are presented as part of Table 1. The comments were slightly more optimistic in that there was not the same level of concern for Hong Kong’s future. For example, with regard to censorship of political commentary, there were fewer comments supporting the viewpoint that political censorship will increase due to direct intervention from China (Viewpoint 4, Table 2a). However, there was more concern about self-censorship (Viewpoint 2, Table 2a) as expressed in the comment ‘‘There is no official pressure but the media is performing some type of self-censorship.’’ In addition, a new viewpoint emerged, that criticism of local political events would be tolerated but criticism of the PRC would be discouraged. For example, one participant commented ‘‘I feel that most media tend to protect themselves by not focusing their critics on the Mainland China issue. Most media put emphasis and criticisms on local issues instead.’’ 4.2.5. Step 5 This step is found only in a subsequent analysis. The statistical comparison appears as part of Table 1 and the change graph appears in Fig. 4. Four of the five events appearing in the initial analysis have moved significantly in a favorable direction. These are the use of English, the independence of judges and courts,

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Fig. 4. Change graph (1997 to 1999).

special treatment for SOEs, and censorship of political commentary. The remaining event, increased taxes, did not move significantly.

5. Conclusion Companies wishing to invest or conduct operations are often faced with uncertain events, some of which are political. They find it necessary to determine the likelihood or degree of change of these events and their impact on the well being of the company. We call the likelihood or degree of change of the event the change index and the impact on the well being of the company the importance of the event. A political event analysis consists of identifying important events and determining their change index and importance. There are two types of political event analysis. An initial analysis is one which is done for the first time, and there is no history of previous analyses. The results are saved for possible future use. A subsequent analysis is one which has such a history. It

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is similar to an initial analyses, but in addition, the saved results of the previous analysis are used to determine whether the events have changed over time. In performing an initial or subsequent analysis, it is often useful to call on the opinions and judgments of persons affected by the events in question. Yet some of these persons may be reluctant to discuss their opinions openly. GSS make it possible to elicit numerical estimates, comments, and interactions from participants about politically sensitive issues that they might have been reluctant or unwilling to discuss in a nonanonymous (face-to-face) setting. There are an increasing number of instances in which (1) companies encounter new economic opportunities, (2) these opportunities are accompanied by risky events, and (3) knowledgeable people are reluctant to discuss these risks openly. Examples are found in many of the emerging markets, which often offer opportunities for trade and investment but also present substantial risks [63,64]. We present an approach that may supplement existing methods of analyzing political risk when these conditions arise.

Acknowledgments This work was done while Dr. Blanning was a Visiting Professor and Dr. Reinig was an Assistant Professor in the Department of Information and Systems Management, School of Business and Management, Hong Kong University of Science and Technology. Appendix A. Discussion and voting items for Hong Kong (1997, 1999) Discussion items 1. Please consider the use of English in Hong Kong over the next five years. Is it likely to change and is it an important issue to multinational business firms? 2. Please consider the tax rate in Hong Kong over the next five years. Is it likely to change and is it an important issue to multinational business firms? 3. Please consider the independence of the judges and courts in Hong Kong over the next five years. Is it likely to change and is it an important issue to multinational business firms? 4. Please consider China’s state owned enterprises in Hong Kong over the next five years. Are they likely to receive special treatment in Hong Kong and is this an important issue to multinational business firms? 5. Please consider censorship of political commentary in Hong Kong over the next five years. Is it likely to change and is it an important issue to multinational business firms? 6. Please consider the Hong Kong dollar peg to the U.S. dollar over the next five years. Is it likely to change and is it an important issue to multinational business firms?1

1

1999 session only.

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Voting items 1. The use of English in Hong Kong will change during the next five years. (1 = more, 10 = less). 2. It is important to multinational business firms that English be used in Hong Kong. (1 = Not Important, 10 = Very Important). 3. Taxes in Hong Kong will increase during the next five years. (1 = No Increase, 10 = Large Increase). 4. It is important to multinational business firms that taxes in Hong Kong be low. (1 = Not Important, 10 = Very Important). 5. Independence of the judges and courts in Hong Kong will change in the next five years. (1 = More Independent, 10 = Less Independent). 6. It is important to multinational business firms that judges and courts in Hong Kong be independent. (1 = Not Important, 10 = Very Important). 7. China’s state owned enterprises will receive special treatment in Hong Kong during the next five years. (1 = No Special Treatment, 10 = Very Special Treatment). 8. It is important to multinational business firms that China’s state owned enterprises not receive special treatment in Hong Kong. (1 = Not Important, 10 = Very Important). 9. Censorship of political commentary in Hong Kong will increase during the next five years (1 = No Increase, 10 = Large Increase). 10. It is important to multinational business firms that there be very little censorship of political commentary in Hong Kong. (1 = Not Important, 10 = Very Important). 11. Will the Hong Kong dollar peg to the U.S. dollar remain during the next five years? (1 = Very likely to remain, 10 = Not at all likely to remain).1 12. It is important to multinational business firms that the Hong Kong dollar peg to the U.S. dollar remain over the next five years. (1 = Not Important, 10 = Very Important).1

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