Identifying micro variables contributing to political risks in international construction projects

The purpose of this paper is to explore the micro-level variables contributing to political risks in international construction projects.

A total of 25 micro-level variables were identified from the literature review, and a questionnaire survey was performed with 138 professionals from both academia and industry. Then, the Spearman rank correlation was used to test whether there was agreement on ranking between the two respondent groups. Furthermore, the 25 variables were grouped into six underlying factors through the exploratory factor analysis.

The results indicated that the most critical variables were “project desirability to the host country,” “relationship with governments,” “misconduct of contractors,” “public opposition to the project,” “experiential knowledge of political risks” and “advantageous conditions of contract.” In addition, the opinions within each group were consistent and there was no significant disagreement on the rankings of variables between academics and practitioners. However, the academic and practitioner groups held different opinions on some individual variables. The impact direction of the variables was associated with confusion among the respondents.

The findings presented in this paper can help international construction enterprises effectively manage political risks in international construction projects.