An Application of Fuzzy Analytic Hierarchy Process Evaluation

Abstract

Unlike previous studies on political risk and Outward Foreign Direct Investment (ODI) that used macro-level ODI data to make analysis, this paper uses of firm-level data to study the relationship between political risk and ODI from institutional distance perspective. This paper builds a relative political risk evaluation system between home country (China and US) and host country (Russia) by Fuzzy Analytic Hierarchy Process (FAHP). We find that relative political risk strengthens China's ability of investing in Russia, and weakens US's. This paper argues that firms that desire investing in high political risk countries should cultivate their relative political risk advantages for their overseas investments. DOI: http://dx.doi.org/10.11591/telkomnika.v11i12.3813