Licensing is most effective in minimizing political risks for a multinational corporation in situations in which the technology is unique and the risk is high.
Political risk is the possibility that an investment's profits will suffer as a result of a country's political upheaval or instability. Changes in the executive, judicial, legislative, or military branches of government may cause instability that has an impact on investment returns.
As the investing time horizon lengthens, political risk, commonly referred to as "geopolitical risk," plays a bigger role. They are seen as a particular kind of jurisdiction risk. Political risks are notoriously difficult to measure due to small sample sizes or case studies when discussing a single country. Some political risks are insurable through international organizations or other government entities.
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