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 MANAGING
POLITICAL RISK ASSESSMENT
 S T U D I E S IN I N T E R N A T I O N A L POLITICAL E C O N O M Y

Edited by Stephen D . Krasner

Department o f Political Science
Stanford University

Albert O . Hirschman, National Power and the Structure of Foreign Trade

Robert A. Pastor, Congress and the Politics of U.S. Foreign Economic Policy
1929-1976
Oran R . Young, Natural Resources and the State: The Political Economy of Resource
Management

Oran R . Young, Resource Regimes: Natural Resources and Social Institutions

Stephen J . Kobrin, Managing Political Risk Assessment: Strategic Response to En-

vironmental Change
 MANAGING
POLITICAL RISK ASSESSMENT
Strategic Response to
Environmental Change

by
Stephen J. Kobrin

U N I V E R S I T Y OF CALIFORNIA PRESS

Berkeley / Los Angeles / London

University of California Press
Berkeley and Los Angeles, California

University of California Press, Ltd.

London, England

Copyright © 1982
by The Regents of the University of California

Library of Congress Cataloging in Publication Data

Kobrin, Stephen Jay.

Managing political risk assessment.

(Studies in international political economy)

Bibliography: p. 211
Includes index.
1. Investments, Foreign—Political aspects.
2. International business enterprises—Political
aspects. I. Title. II. Title: Political risk
assessment. III. Series.
HG4538.K59 658.1'52 81-21979
ISBN 0-520-04540-8 AACR2

Printed in the United States of America

For Jeanne
 Contents

PREFACE

INTRODUCTION
Approach
Research Objectives
Method
Design
Implementation
Constraints
Plan of the Book

ORGANIZATIONS AND ENVIRONMENTS

The Organizational Environment
Open Systems 10
Environmental Structure 11
The Subjective Environment 12
The Task Environment 13
Enacted Environments 15
Natural Selection Models 15
Spanning the Organizational Boundary
The Boundary Spanning Function 17
Evolution of the Boundary Spanning Function
Institutionalization 19
Environmental Factors Affecting Institutionalization
Organizational Factors Affecting Instititutionalization
The Processing of Environmental Information
Information Flows in the International Firm 27

T H E RELEVANT E N V I R O N M E N T :
POLITICAL RISK A N D POLITICAL ASSESSMENT
The Political Environment
Previous Attempts at Definition
Political Risk
viii / Contents

The Investment Climate 35

Political Instability and Political Risk 36
Environment and Firm 37
Government Policy as an Intervening Variable 38
Micro Risk 39
Operations versus O w n e r s h i p 40
Uncertainty and Political Risk 41
The Nature of Change 42
Uncertainty Defined 42
Uncertainty Is Subjective 44
The Political Assessment Problem 45
Uncertainty and Decision Making 47
Summary: Political Risk 48

4. T H E POLITICAL E N V I R O N M E N T A N D
T H E I N T E R N A T I O N A L FIRM 50
T h e National Firm 51
Internationalization of the Firm 52
Effects of Internationalization 55
T h e Political-Economic Environment 57
The Politicization of Economics 57
Nationalism 58
Instability 60
Interstate Politics 60
United States H e g e m o n y 62
Impacts on Strategy 63
The Expansion of the Task Environment 65

5. I N S T I T U T I O N A L I Z A T I O N O F T H E POLITICAL
ASSESSMENT F U N C T I O N 67
Institutionalization Defined 68
Determinants of Institutionalization 69
Size 70
Internationalization 71
Experience 73
Industrial Sector and Technology 73
Analysis of the Empirical Data 75
Indicators of Institutionalization 75
 Contents / ix

Determinants of Institutionalization 76
Relative Importance of Determinants
of Institutionalization 80
Logit Analysis 83
Conclusion 85

6. O R G A N I Z A T I O N O F T H E POLITICAL
ASSESSMENT F U N C T I O N 87
A Typology 88
Location of the Political Assessment Function 92
Organization of the Assessment Function 93
Function N o t Differentiated but Implicit 94
Function Implicit but Inherent 95
Function N o t Differentiated but Explicit 96
Function Differentiated but Not Position 99
Function and Position Both Differentiated 101
T h e Staff Coordinator 102
Political Analysis Units 104

7. M A N A G E R I A L P E R C E P T I O N S O F P O L I T I C A L RISK 111
Previous Studies 111
Managerial Concerns 114
Unfamiliarity and Uncertainty 116
Uncertainty and Perceptions of Political Risk 120
Multiple Task Environments 123
Conclusions 124

8. S C A N N I N G T H E POLITICAL E N V I R O N M E N T 125
Motivations for Scanning 125
Sources of Information 129
Previous Studies 129
An Overview 130
Interpersonal Information Sources and Uncertainty 133
General External Sources 135
Specialized External Sources 136
Problems in Relying on Internal Sources 140
Sources of Bias 141
Informal and Formal Search 145
x / Contents

9. EVALUATION A N D UTILIZATION OF
POLITICAL ASSESSMENTS 147
Use of Political Assessments 148
Evaluation and Analysis 149
Patterns of Communication 151
Integration into Decision Making and Planning 155
Investment Decision Making 156
Planning 159
General Conclusions 160
Better-Informed Judgment 163
Multiple Sources of Information 164

10. CONCLUSIONS 165

Institutionalization 165
Uncertainty and Ambiguity 170
Argument for Institutionalization 175
More Effective Scanning 176
Patterns of Communication 177
Organizational Learning 178
Organizational Issues 179
Politics and the Managerial Process 181

APPENDIXES

A. Research Methods and Sample Characteristics 183

B. Multivariate Logit Analysis of Determinants
of Institutionalization 193

C. Political Risk Assessment Methods 198

BIBLIOGRAPHY 211

INDEX 221
 Preface

M y interest in political risk assessment was aroused by a discor-

dance between research results and managerial perceptions. Earlier em-
pirical work suggests that the relationship between political events and
foreign direct investment is complex: it is specific changes in government
policy rather than dramatic systemic events, such as revolution, which
account for most impacts on firms. While there are exceptions, vulnera-
bility to political risk appears to depend as much on project characteris-
tics as it does on political events.
Yet much o f the literature, and my own experience, indicate that it
is dramatic systemic change—revolution, violent political conflict, and
sharp shifts in ideology—which is the primary focus o f managerial atten-
tion. Managers are asking the wrong questions o f the wrong data. As a
result, I believe that risks are overstated and that potentially profitable
opportunities are avoided.
That is, I first saw the problem as one o f improving corporate intel-
ligence. More effective political assessment requires a more accurate un-
derstanding o f the risks facing the firm, better information sources, and
more sophisticated processing methods. M y view changed markedly,
however, as I studied the survey results and interviewed managers. A l -
though concern with politics abroad may be new and somewhat exotic,
the problems that managers face in its assessment certainly are not. Politi-
cal risk assessment is an emerging managerial function, and as with any
such function, more effective performance requires setting objectives and
then developing strategies and organizational structures to facilitate their
implementation. While information sources and processing methods are
important, they are technique. T h e critical strategic issue is the manage-
ment o f resources.
As the title indicates, this book focuses on the management o f politi-
cal risk assessment. It explores, both theoretically and analytically, such
topics as the relationship between a business firm and its environment,
the development o f organizational structures to facilitate effective assess-
ment and their institutionalization, communication between staff groups
xii / Preface

and line managers, and the use of assessments in planning and decision
making. It deals with the fundamental issue of organizational response,
strategically and structurally, to environmental change.

I owe a great deal to a number of colleagues w h o made significant

contributions. Dick Robinson, m y area head at Sloan, suggested the idea
to me. While he managed to do it in a way that provided absolutely no
hint of what I was getting into, he more than made up for it over the next
few years through substantial released time and, more important, friend-
ship and intellectual support.
In one of those rare, but critically fortuitous, circumstances, I
discovered shortly thereafter that the Conference Board was about to
undertake a similar effort under the direction of Stephen Blank. We joined
forces in what was to result in a very productive and stimulating collabora-
tion. T h e survey and the field work, which were conducted jointly, also in-
volved Joseph La Palombara of Yale University and John Basek of the
Conference Board. Stephen Blank and I have continued to collaborate,
and some of the ideas in this book were developed together. The C o n -
ference Board, under the sponsorship of Walter Hamilton w h o was vice-
president for public affairs research, underwrote the cost of the survey
and the field research.
I think that the success of our collaboration is important at a time
when traditional sources of foundation and government research funding
are becoming scarce. T h r o u g h planning we were able to meet the C o n -
ference Board's needs for information and for a publication for the
general manager and m y needs for sufficient methodological rigor to
support this book for academics and specialists. We all believe that the
cross-fertilization was valuable.
Many other individuals made major contributions. Jolene Larson
and Jan Hack Katz provided very able research assistance. T h e results,
however, are mixed. After working on this book Jolene gave up a p r o m -
ising academic career for banking while Jan has remained within the fold.
Gene Skolnikoff and A m y Leiss at the Center for International Studies at
M.I.T. provided substantial support including funding, office space, and
a very stimulating intellectual environment in which to work. Virtually
all the analysis and writing were done at the C.I.S. M o r e often than she
may care to remember, A m y took time f r o m a very busy schedule to lis-
ten to m y problems. T h e support of the C.I.S., at both the personal and
the organizational level, was essential.
 Preface / xiii

A number of colleagues reviewed the manuscript in its entirety. Ed

Schein provided critical comments and also a good deal of encourage-
ment at a time when it was sorely needed. David Blake, Lou Wells, Tom
Gladwin, and Steve Krasner all made helpful comments on earlier drafts.
I also am indebted to anonymous reviewers for their efforts.
Chuck Lockman at the C.I. S., a true virtuoso on the word processor,
typed the entire manuscript and made innumerable changes cheerfully and
rapidly. I am also indebted to the many managers who took the time to
respond to the mailed survey and to be interviewed. I hope that they re-
gard their efforts as worthwhile.
Last, it would be an unpardonable omission not to thank my wife
Jeanne for having the good common sense never to agree with anything I
ever said about this book.
S.J.K.
 1
Introduction

Venturing abroad has always been accompanied by risk and uncer-

tainty. The traveler leaves the comforts of home and enters an unfamiliar
environment where events seem to take a different course and their mean-
ing and significance are difficult to fathom. De Tocqueville (1956:225)
caught the essence of the problem more than a century and a half ago. An
American traveling to Europe, he wrote,

. . . has been informed that the conditions o f society are not equal in our
part o f the globe; and he observes that among the nations o f Europe, the
traces o f rank are not wholly obliterated. . . . He is therefore profoundly
ignorant o f the place which he ought to occupy in this half-ruined scale o f
classes. . . . He is afraid o f ranging himself too high, still more is he afraid
o f being ranged too low; this twofold peril keeps his mind constantly on
the stretch, and embarrasses all he says and does.

Business firms are no exception. International business requires that

plans be made and decisions taken in one culture based on stimuli arising
in another. Going abroad to exploit new opportunities exposes a firm to
new environments and new sources of risk. One source of risk receiving
considerable attention in the past decade is the political environment,
particularly in less developed countries. Although political risk is not a
new phenomenon, concern over it has increased significantly in recent
years. This new prominence has been reflected in an outpouring of arti-
cles on the subject in the business press, wider academic attention, com-
mitment of resources to assess political risk by a significant number of
international firms, and, finally, the most important indicator of legit-
imacy, the emergence of a large number of consulting firms offering ser-
vices to help management come to grips with political problems abroad.
The high level of attention paid to political risk is an indication that
external political environments have become directly relevant to the man-
2 / Introduction

agerial strategy of the international firm. This relationship is not a short-

run departure from the norm; rather, it is a result of fundamental secular
changes in both organization and environment in the decades since the
end of World War II.1 The political environment has become a critical
factor in the setting and achievement of corporate goals. Even the largest,
most international corporation must function in a transnational reality of
fragmented and independent nation-states. The need to keep corporate
objectives in sight while operating in a large number of widely different
external environments is the basic strategic problem facing the modern
multinational firm.
Much of the work on political risk assessment to date—aside from
that concerned with the basic nature of the problem—has focused on tra-
ditional concerns of intelligence analysis such as data sources and process-
ing methods. Wilensky (1967:3) defines organizational intelligence as
"the problem of gathering, processing, interpreting, and communicating
the technical and political information needed in the decision-making
process." His emphasis, however, is clearly placed on intelligence as a
problem in the sociology of complex organizations.
In much the same vein, I am approaching political risk assessment
as a problem of managerial process. It is seen as a specific manifestation
of the more general problem of complex organizations existing as sys-
tems open to, and interacting with, their external environment. As with
any managerial function, the effective assessment of political risk requires
setting objectives, developing strategies to achieve them, and establish-
ing organizational structures to implement the strategies.
The specific subject of this book is the assessment and evaluation of
political environments abroad and the use of those assessments in strate-
gic planning and decision making. The process is described as the politi-
cal assessment function. It includes perception of external political en-
vironments by individuals and organizations, crossing or spanning the
firm's boundaries in order to scan those environments, processing and
transmitting information about political environments within the firm,
and incorporating the information into managerial strategy.
My major theme encompasses the emergence and institutionaliza-
tion of the political assessment function in international firms based in the

1. Significant changes in both intrastate and interstate social and political environ-
ments are discussed in depth in chapter 4. These include, inter alia, the increase in political
conflict, the effects of widespread decolonialization, increased nationalism, increased pres-
sure on policymakers to exert control over their economies, an increase in the number of
states and in their diversity, and a decline in United States hegemony.
 Introduction / 3

United States. Institutionalization entails differentiation of the function

by explicit assignment of responsibililties for its performance and by de-
velopment of specialized organizational positions and formalization or
systematization of the analytical process. In particular, institutionalization
of the political assessment function is an adaptive response by manage-
ment to perceptions of potentially significant managerial contingencies
arising f r o m political environments abroad. The probability that such
contingencies will arise is a function both of the nature of external politi-
cal environments and of the strategy and structure of the corporation.
Contingencies result from organization-environment interaction.

APPROACH

M y approach to political risk assessment is interdisciplinary, ap-

plied, and exploratory. Although the literature dealing directly with po-
litical assessment by international firms is somewhat limited, a large
body of work in related disciplines is directly material. I therefore draw
upon the literature of organizational theory, international management,
political economy, and international relations to develop a conceptual
framework that will be of use in my specialized field.
The study is applied in that no attempt is made to contribute to the
theoretical base in any of the relevant disciplines. The relationship be-
tween theory and practice is, however, not unidirectional. Whereas the-
ory is used in an effort to understand reality, the application of theory
should have feedback effects on its development.
The study is exploratory at the analytical level: it is designed to gen-
erate rather than to test hypotheses. The relationship between theory and
data is considerably more interactive than is the norm, and in some in-
stances I first became aware of potentially important relationships during
data collection and analysis. Thus, theory drawn from the disciplines dis-
cussed above serves as a context in which to interpret research findings
rather than as a basis for the a priori deduction of testable hypotheses.

RESEARCH OBJECTIVES

M y first objective is to be able to make inferential statements about

current practice by United States—based international firms. The study
should serve as a benchmark, describing how firms in the target popula-
4 / Introduction

tion assess foreign political environments, how those assessments are eval-
uated and processed within the firm, and, most important, how evalua-
tions of political factors are utilized in strategic planning and investment
decision making.
My second objective is analytical. As seen in chapter 2, this study is
based on an open systems perspective which posits an interdependent re-
lationship between organizations and the larger external environment.
Thus an attempt is made to explain practice, relating the findings to an
interdisciplinary conceptual framework by analyzing variables that char-
acterize organizational strategy and structure and the causal texture of the
external political environment. This framework facilitates a deductive
analytical process. It serves to inform empirical results, allowing for the
analysis of phenomena and relationships against a more general context.
The structure serves to guide exploration and to increase confidence in
the validity of the findings. As noted above, the framework is not in-
tended to generate testable hypotheses. Rather, my intention is to explore
the nature of the phenomenon and, in so doing, to suggest an appropriate
explanatory theory that will guide further research.

METHOD

The choice of method follows directly from the research objectives.

Making inferential statements about population parameters, that is, accu-
rately describing current practice, requires a survey of the population or a
probability sample. Understanding practice, that is, analyzing compo-
nents of the complex phenomenon in question and relating it to an ap-
propriate conceptual framework, requires in-depth and flexible personal
interaction with a limited number of respondents.
The actual study combined survey and qualitative research tech-
niques. A questionnaire mailed to the entire target population of large
United States-based international firms was followed by in-depth per-
sonal interviews with managers in a subset of firms selected via a stratified
quota sample of respondents to the survey. The survey and interviews
were undertaken jointly by myself and the Conference Board in late 1978
and early 1979.2 More technical details about the methods used are con-
tained in Appendix A.

2. The mailed survey and the interviews were conducted by myself, by Dr. Stephen
Blank and John Basek of the Conference Board, and by Dr. Joseph La Palombara of Yale
 Introduction / 5

DESIGN

T h e target population was defined as relatively large, industrial,

United States-based international firms. Firms in the financial sector, such
as banks and insurance companies, were not included. A "relatively large"
f i r m is one w h o s e 1976 sales amounted to $100 million or more, a categor-
ization approximating the Fortune 1000. 3 "International" is defined mini-
mally in terms of at least one substantive productive operation abroad
which was established t h r o u g h foreign direct investment or contract. 4
Applying these criteria, a target population of 455 firms was se-
lected f r o m the 5,000 companies listed in the Conference Board's Key
Company Directory.5 To questionnaires mailed in August 1978, 193 usable
replies (42.4 percent) were received by the cutoff date of N o v e m b e r 1,
1978. T h u s all replies were received before the 1 9 7 8 - 7 9 Iranian crisis
reached the boiling point and significantly increased the salience of the
political assessment function for American managers.
T h e decision to draw the stratified quota sample for follow-up per-
sonal interviews f r o m the respondents to the mailed questionnaire, rather
than f r o m the target population as a whole, was a practical one. Firms
that refused to respond to the questionnaire would probably not agree to
extensive personal interviews. In addition, using respondents as a s a m -
pling f r a m e gives the researcher the advantage, in both selection and
analysis, of being able to draw on the substantial information provided
by the survey. In accordance with previous research, industrial sector and
size (global sales) were selected as the primary and secondary bases for
stratification. 6

University. T h e research has generated t w o other publications: Blank et al. (1980) and
Kobrin et al. (1980).
3. T h e t h o u s a n d t h firm in the 1976 F o r t u n e industrial listing had sales of $100.6 m i l -
lion. T h e 1976 sales of the smallest firm in o u r target population w e r e exactly $100 million.
4. Foreign direct i n v e s t m e n t (FDI) entails managerial control, b y full or partial e q -
uity o w n e r s h i p , over an enterprise in another country. A n u m b e r of firms in the sample,
such as those in p e t r o l e u m and construction, maintained substantive operations, abroad
t h r o u g h contract rather than t h r o u g h FDI.
5. T h e Key Company Directory contains data o n approximately 5,000 U n i t e d States
firms. It should be n o t e d that, since usable data o n internationalization w e r e limited, c o m -
parison of respondents w i t h t h e target population was m a d e o n the basis of variables such as
sales, sector, the n u m b e r of countries with m a n u f a c t u r i n g operations, and the existence of
m i n i n g or extractive ventures abroad.
6. Research o n international organization (e. g., S t o p f o r d and Wells, 1971) and o n
p h e n o m e n a such as expropriation (Kobrin, 1980) suggests that industrial sector is an i m p o r -
tant d e t e r m i n a n t of factors such as organizational strategy and the potential impact o f t h e
6 / Introduction

The request for multiple interviews within each firm was gener-
ously met: 113 managers in 37 firms were actually interviewed. Because
three firms did not provide sufficient access, the base for analysis is 110
managers in 34 firms.

IMPLEMENTATION

As noted above, 193 usable questionnaires were returned in response

to the mail survey. The relatively high response rate (42.4 percent) is a
clear indication of management interest in the topic. Respondents to the
survey are representative of the target population on the basis of firm size
(global sales), industrial sector, and the existence of mining or extractive
operations abroad. 7 Respondents were, however, significantly more likely
to operate majority-owned manufacturing subsidiaries in a larger number
of countries than was the population as a whole (8.1 versus 5.9).
Some bias is evident in the subsample of firms interviewed. Clearly
those firms are larger: their mean sales are more than double those of the
total population ($4,181 versus $2,028 million). Although differences in
industrial sector are not statistically significant, considerably more varia-
tion (versus the distribution for the target population) is evident for sub-
sample firms than for respondents to the survey. In particular, consumer
products and high technology firms tend to be underrepresented. The
subsample of firms interviewed also seems to be considerably more in-
ternational than the target population as a whole.
In summary, the respondents to the mailed questionnaire are rea-
sonably representative of the target population, and inferences are likely
to contain little bias. The subsample firms interviewed, however, are

environment. Factors such as technological and advertising intensity directly affect foreign
investment. Oil firms are clearly more vulnerable to political factors than are high technol-
ogy industries. Organizational size is a major determinant of the propensity to differentiate
managerial functions (see chap. 5).
7. As mentioned in note 5, comparison of the respondents with the target popula-
tion was affected by the limited data in the Key Company Directory on internationalization of
the firms. The percentage of sales generated abroad and the total number of countries in
which the firm has substantial operations were not available. Nevertheless, given the data
that are available and the relatively high response rate, I am confident that the respondents
are representative of the population. Data on size and sector, which are important determi-
nants of many of the factors of interest in this study, were available and complete.
 Introduction / 7

larger and more international than the population as a whole. Thus, while
it is reasonable to explore the development o f the environmental assess-
ment process through the interview data, the distribution o f responses
across firms may not be representative of the target population. Data
f r o m the mail survey and those from the follow-up interviews serve some-
what different purposes. Inferential statements about population param-
eters, that is, about the extent, scope, and determinants o f the political
assessment function, are based on the data derived from the mail survey,
whereas the personal interviews are used to interpret the survey data and
to generate hypotheses about the development o f the function and causal
relationships among organizational and environmental characteristics.
O b v i o u s l y the distinction is not absolute. T h e mail survey data serve an-
alytical as well as descriptive purposes, and, in a f e w instances where in-
terview data allow inferential statements, given the bias in the subsample,
they serve as the basis for assessments of current practice.

CONSTRAINTS

Because o f the recent emergence of the field as a focus o f manage-

rial and academic attention, and the paucity o f experience with impacts
imposed on firms as a result of political factors abroad, basic concepts
such as political risk, the investment climate, and even political assess-
ment remain vague and have been only subjectively defined. T h e lack o f
agreement on the definition o f key concepts, much less on their actual
operationalization, substantially increased the difficulty o f designing re-
search instruments and, more important, o f conceptualizing the nature o f
the phenomenon and relationships among its components.
Furthermore, the exploratory character o f the study meant that
some hypotheses to be examined through analysis o f the survey data
were suggested well after the instrument had been designed, indeed, after
the data had been collected. Constructs had to be made operational ex
post facto, utilizing data not collected for that purpose. Put another way,
it was necessary to explore relationships after the fact which were not ob-
viously important when the design o f research instruments was under-
taken. While the results are often of interest, they are not based on data
generated through the rigorous operationalization o f concepts combined
with specific and systematic collection procedures.
8 / Introduction

PLAN O F T H E B O O K

Chapter 2 develops a basic conceptual framework from the litera-

ture on organization-environment interaction. The framework is an es-
sential foundation for later analysis, but the reader interested primarily in
the description of the political analysis function should skip to chapter 3,
which deals directly with the nature of political risk and the role of uncer-
tainty in political assessment. Chapter 4 draws on concepts from inter-
national business and international political economy to explain the
recent emergence of political environments as a subject of concern to
managers of international firms.
Chapter 5 suggests theory explaining the propensity to institution-
alize the political assessment function and analyzes the empirical evidence
derived from the mail survey and the interviews. Chapter 6 describes the
organization of the political assessment function in the firms surveyed. It
describes current practice on the basis of short case studies in the context
of a typology developed from the interview data.
Chapter 7 draws on both survey data and personal interviews to
discover how managers perceive the political environment. Chapter 8 fo-
cuses on international scanning, looking at the stimuli that motivate po-
litical analysis and sources of information about political environments
abroad. Chapter 9 is concerned with the critical issue of the utilization of
political assessment in strategic planning and decision making. Chapter
10 reviews the major findings and suggests general conclusions.
 2
Organizations and
Environments

The emergence of the political assessment function within interna-

tional firms may be approached from two different levels of analysis. The
first comprises the evolution, organization, and performance of the func-
tion itself. The second approach is more general; it examines the function
as an example of organization-environment interaction, of a change in
strategy and structure resulting from changes in perceptions of the en-
vironment. I follow both approaches in this book in the hope that the
reader will find the process to be synergistic. Generalization should in-
form description and analysis, and application should illuminate and en-
rich theory.
The more general organization-environment approach may be sum-
marized as follows. An organization is an open system linked to its en-
vironment through flows of information processed by one or more of its
members. Environments are inherently subjective; they are as perceived
by individuals whose roles place them at the organization's boundary.
Perceptions of environments are determined by their causal texture, by
organizational factors such as strategy and structure, and by individual
cognitive processes.
All organizations scan environments perceived as relevant, process
and transmit the derived information internally, and incorporate environ-
mental evaluations into planning and decision making. Performance of
this function, and specifically the degree to which it is explicit, formalized,
and institutionalized, depends on managerial perceptions of the proba-
bility that costly contingencies will arise from the environment. That
probability, in turn, is a function of the interaction of environment and
organization. 1

1. Although the process is clearly reciprocal, the model is unidirectional at the

boundary of the organization, as it is concerned only with the impact of the environment
io / Organizations and Environments

In this chapter I draw upon organization-environment literature t o

develop a conceptual framework for analysis of the emergence of the p o -
litical assessment function. Three general topics are discussed: the na-
ture of organizational environments; how organizational boundaries are
spanned to obtain environmental information; h o w that information is
processed and communicated within the organization.

THE ORGANIZATIONAL ENVIRONMENT

OPEN SYSTEMS

There is little need to argue that organizations in general, and busi-

ness firms in particular, function as systems open to their environments
(Aldrich, 1979; Beckhard and Harris, 1977; Lawrence and Lorsch, 1967;
Miles, 1980; Meyer and Associates, 1978). As T h o m p s o n (1967:6) notes,
"the complex organization is a set of interdependent parts which taken
together make up the whole . . . which in turn is interdependent with
some larger environment."
An open systems perspective implies that organizations must adapt
to their environments 2 and that environmental interaction is a significant
factor in the development and functioning of the organization (Beckhard
and Harris, 1977; Meyer and Associates, 1978). Once an open systems
point of view is accepted, "the nature of environment . . . becomes a
critical area of study. The behavior of an organization is contingent upon
the social field forces in which it occurs and must be understood in terms
of the organization's interaction with that environment field" (Katz and
Kahn, 1978:3).

u p o n the firm. M y primary concern is the processing of environmental i n f o r m a t i o n — a s -

sessment, evaluation, and integration into strategic planning and decision m a k i n g — r a t h e r
than the appropriate strategic response. In making this statement I am not denying the i m -
portance of the firm's impact on the environment; I am simply defining the scope of m y
investigation. I have earlier (Kobrin, 1977) published an analysis of the impact of foreign
investment on social modernization.
2. T h e organizational-environmental fit, however, is contingent rather than uniquely
determined. That is, whereas there may n o t be a single optimal strategy or structure that
"best fits" with any given environment, certain strategies a n d / o r structures are m o r e effec-
tive than others. See Galbraith and Nathanson (1978).
 Organizations and Environments / 11

ENVIRONMENTAL STRUCTURE

T h e literature describes a number o f typologies developed to im-

pose structure on what has been called the causal texture o f the envi-
ronment, that is, "the extent and manner in which the variables relevant
to the constituent organizations (organisms) are, independently o f any
particular part, causally related or interwoven with each other" (Em-
ery, 1967:218). The variables involve either specification o f dimensions
(Child, 1972; Duncan, 1972; Katz and Kahn, 1978), ideal types (Emery
and Trist, 1965), or both (Aldrich, 1979). Accepting the risk o f over-
simplification in the interests o f parsimony, I characterize the relevant en-
vironment in terms o f two dimensions and a condition that arises from
interaction between them. The typology, though neither exhaustive nor
original, is sufficient for my purposes.
T h e two dimensions are complexity and dynamism. T h e condition
is a turbulent field. The first dimension, which is scaled in terms o f rela-
tive homogeneity and relative heterogeneity, concerns the number o f en-
vironmental components and their degree o f similarity or difference (Al-
drich, 1979; Child, 1972; Duncan, 1972). It has both a quantitative and a
qualitative aspect. The complexity o f an organization's environment may
be envisioned as a two-by-two matrix with one axis scaled in terms o f the
number o f relevant elements and the other in terms o f the relative homo-
geneity or heterogeneity o f the elements in the field. Complexity in-
creases as one moves toward an increase in the number and the hetero-
geneity o f elements.
T h e second dimension has to do with stability or variability. It has
been defined (Child, 1972) as the frequency o f change in environmental
elements, the degree o f difference entailed in each change, and a second
derivative, the variability o f change itself. Other conceptions o f environ-
mental dynamism are similar (Aldrich, 1979; Duncan, 1972; Katz and
Kahn, 1978). Thus the organizational environment is perceived as more
dynamic if the frequency o f change increases and/or if the changes that
take place are more significant. Other things being equal, dynamism is
greater to the extent the rate o f change is more variable.
Turbulent fields entail dynamic processes that emerge as an un-
planned and often unforeseen result o f interactions o f component systems;
they are autochthonous (Emery, 1967). They involve discontinuities
where changes in the nature o f the environment are difficult to predict
12 / Organizations and Environments

either f r o m change along its individual dimensions or f r o m the actions of

individual organizations. Emery (1977:14) suggests that one factor lead-
ing to the emergence of turbulent fields is the growing interdependence
among all sectors of society: "The productive sector is increasingly en-
meshed in social responsibilities as citizens assert their role not just as
producer but as consumer, inhabitant and as a social and political entity."
Turbulent fields result f r o m interactions among environmental elements
which produce results that are difficult to foresee. They entail processes
that have been described in the literature of catastrophe theory as "sudden
transformations and unpredictable divergences, which call for [mathe-
matical] functions that are not differentiable" (Zeeman, 1976:65).
I argue in chapter 4 that the emergence of the political assessment
function is an adaptive response to increased complexity, variability, and
turbulence in the environment of the international firm. As organization-
environment interaction takes place through individual cognitive pro-
cesses, however, it is subjective perceptions of environmental change,
rather than that change itself, which are important.

THE SUBJECTIVE ENVIRONMENT

T h e organizational environment is inherently subjective. In fact, all

h u m a n perceptions of reality are basically subjective. Hannah Arendt
(1977:108) has put it well:

Nothing that appears manifests itself to a single view capable of perceiving

it under all of its inherent aspects. The world appears in the mode of it-
seems-to-me, depending on particular perspectives determined by location
in the world as well as by particular organs of perception. Not only does
this produce error, which I can correct by changing my location, drawing
closer to what appears, or by improving my imagination to take other per-
spectives into account; it also gives birth to true semblances—that is true
deceptive appearances, which I cannot correct like an error, since they are
caused by my permanent location on the earth and remain bound up with
my own existence as one of the earth's appearances.

At a less abstract level it is clear that all individual perceptions of

reality, including organizational environments, are strongly influenced
by one's assumptions about what one is perceiving. In his classic paper
on subjective rationality, Simon (1955:101) differentiated between givens
 Organizations and Environments / 13

or constraints within which rational adaptation must take place and be-
havior variables, noting that the latter refer to the organization and the
former to the environment. He goes on to say, however, that "if we
adopt this viewpoint, we must be prepared to accept the possibility that
what we call 'the environment' may lie, in part, within the skin of the
biological organism. That is, some of the constraints which must be
taken as givens . . . may be physiological and psychological limitations
of the organism."
At the heart of the problem are the difficulties encountered in at-
tempts to discover reality inductively. The individual or group must
somehow organize a limited number of observations into a coherent view
of the whole. This process of organization and interpretation is heavily
dependent on a priori theories and beliefs (Starbuck, 1976). One's percep-
tion of reality is, to a large degree, a function of what one has come to
expect reality to be like. Perceptions result from the interaction of infor-
mation, prior experience, and individual cognitive processes.

THE TASK ENVIRONMENT

If the environment is subjectively perceived, and if perceptions are

colored by individual, organizational, and environmental characteristics,
it is reasonable to expect perceptions of the same objective environment
to vary among individuals, units within organizations, and entire organi-
zations. "The same environment one organization perceives as unpredict-
able, complex and evanescent, another organization might see as static
and easily understood" (Starbuck, 1976:1080).
In part, such variance depends on how the relevant or task environ-
ment is defined. Organizations exist as open systems, but if the openness
is complete the organization will cease to exist as a distinct entity (Katz
and Kahn, 1978). The organization is circumscribed by boundaries even
if they are diffuse and permeable; Starbuck (1976) compares them with
those surrounding a cloud or a magnetic field.
Nevertheless, viewing the environment as a residual (i.e., every-
thing that is not the organization) is also unsatisfactory, as it does not dis-
tinguish between what is potentially relevant and what is "just out there"
(Miles, 1980). As Simon (1976a, 1978) notes in a more general context,
the number of considerations potentially relevant to an organization is so
large that only the more salient are within the organization's "circle of
14 / Organizations and Environments

awareness" at any given time. Decision makers are content to disregard

factors that seem to be irrelevant. In the context of the issue at hand,
managers are concerned with the task environment. They are concerned
with the subset, or that "part of the total environment . . . which [is] p o -
tentially relevant to goal setting and goal attainment" (Dill, 1957:410).
The relevant environment encompasses physical and social factors taken
directly into account in decision making (Duncan, 1972). Thus organiza-
tions are not concerned with the totality of the physical and social en-
vironment in which they exist and operate, but with that portion or area
relevant to organizational strategy. The scope of the relevant or task en-
vironment is defined subjectively; it is as perceived by managers (Downey
and Slocum, 1975; Duncan, 1972; Starbuck, 1976).
To the extent that individuals, units, and organizations have dif-
ferent goals, or even different means for attaining the same ends, their
task environments are different. In large part, however, the variance in
relevant environments arises f r o m differences in perceptions. As Dill
(1962:106) concludes, "Individuals and subgroups within organizations
do not have the same task environments. . . . Instead of representing a
c o m m o n exposure to a c o m m o n environment, the actions that they take
in interaction with one another represent the direct confrontation of dif-
ferent exposures."
Perceptions of task environments vary across both space and time.
Different individuals, and different organizational subunits, perceive, and
through their perceptions exist, in very different environments at any
point in time (Aldrich, 1979; Cyert and March, 1963; March and Olsen,
1979). The same unit exists in different environments over time as a re-
sult of changes in individuals, organizations, or environment (Dill, 1962;
T h o m p s o n , 1967).
These differences in perceptions reflect differences not only in infor-
mation but also in individual and organizational experience and cognitive
processes. They reflect differences in a priori assumptions about the struc-
ture of reality. Thus, even if given exactly the same information about the
environment, two organizational subunits can exist in two very different
task environments at the same time. Perceived task environments are a
function, at least in part, of such organizational variables as strategy, posi-
tion in the hierarchy, history, and the like.
 Organizations and Environments / 15

ENACTED ENVIRONMENTS

In fact, it can be argued that relevant organizational environments

are actually created through individual and organizational perceptions
(Weick, 1969). In a review of the organization-environment literature,
Starbuck (1976:1069) concludes that organizational environments are
largely invented by the organizations themselves: "Organizations select
their environments f r o m a wide range of alternatives and then subjec-
tively perceive the environments they inhabit."
I am not arguing that environments do not exist objectively. They
do, of course, and they have real attributes (Downey and Slocum, 1975).
The organizational environment, however, is created or enacted in the
sense that it is as perceived by the organization at any given point in time.
Furthermore, the range of perceptions consistent with effective organiza-
tional performance, or perhaps even with organizational survival, is finite.
The organization is directly affected by distorted or dysfunctional per-
ceptions of the environment, but that is not to say that a given environ-
ment uniquely determines a single organizational outcome. Rather, it
implies that all organizational alternatives are not equally effective (Gal-
braith and Nathanson, 1978). Miles, Snow, and Pfeffer (1974:249) argue
thr.t "a wide range of perceived environments may be tolerable for lengthy
periods in many real circumstances." In fact, Snow and Miles found major
differences in perceived environments in the same industry (textbook
publishing), more than one of which were consistent with successful per-
formance (reported in Miles, Snow, and Pfeffer, 1974).

NATURAL SELECTION MODELS

A view of the environment as information perceived by organiza-

tions is not universally accepted in the literature. A number of authors
have proposed a natural selection or ecological model of organizational
change in which the environment is viewed in terms of resources for
which organizations compete. The model is based on the assumption that
organizations or organizational forms "fitting" the environment are posi-
tively selected and survive, while others fail or change (Aldrich, 1979).
Proponents of the natural selection model agree that perceptions of orga-
nizational environments are subjective, but they argue that the factors
discussed above, such as the difficulty of building inductive models and
Another random document with
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 CHAPTER III.
Before the familiar figure of Robert Smith quite fades from the
story of his time, the mystery which he succeeded in throwing
around his true sympathies needs explanation. When dismissed
from the Cabinet in March, he was supposed to be a friend of France
and of the President’s French policy. In June he appeared before the
public as an opponent of Madison and of French influence. Perhaps
in reality he neither supported nor opposed either policy; but he
deserves such credit as friendly hands gave him at the moment of
his disgrace, and on no one had he made a happier impression than
on Serurier, the new French minister. After six weeks’ experience,
Serurier, who looked upon Gallatin as little better than an enemy,
regarded Robert Smith as a friend. March 5, while Gallatin was
writing his resignation, Serurier wrote a despatch to Cadore giving
his estimates of the two Cabinet officers:[44]—
“Mr. Gallatin, perhaps the most capable man in the Republic,
under an exterior rigidly Republican hides his ambitious designs, his
feelings of superiority, which torment him without his being able to
satisfy them. People maintain that all his system as a financier is
English,—a thing simple enough; and that, on another side, he thinks
himself obliged to expiate the sin of being a stranger and born on our
frontiers, by separating himself from us in his political principles. I am
told also that he has seen with annoyance the occupation by France
of Geneva, his country,—whither he expected to withdraw himself with
his riches, if his ambition should be crossed here by events. I have as
yet no cause for complaint in regard to him, but this is the way he is
talked about by the Frenchmen here, and by the party most nearly in
sympathy with us (le parti qui se rapproche le plus de nous).”
The fable of Gallatin’s richesses revealed the source of Serurier’s
information. The party most nearly in sympathy with France was the
“Aurora” faction, which spread stories of Gallatin’s speculations and
treated him with vindictive enmity, but regarded Robert Smith as a
friend. Serurier’s description of Gallatin’s character contrasted darkly
with his portrait of Robert Smith:—
 “Mr. Smith shows certainly a character equally decided, but more
open. His system seems more Continental; at least he wishes me to
think so. With perhaps less breadth of mind, he has more elevation. I
know that he nourishes a secret admiration of the Emperor, which he
very wisely hides. I dined with him three days ago; it was my first
dinner. On leaving the table he sent for a bust and an engraving of his
Majesty, and on this subject said to me things full of politeness. In the
conversation which followed, he became more expansive: ‘The nation’
(it is he who is speaking) ‘is bold and enterprising at sea; and if war
should break out with England, supposing this rupture to be
accompanied by a full reconciliation with France, the commerce
between Europe and America might become more active than ever.
The Americans possess a sort of vessels called schooners, the
swiftest sailers in the world, and for that reason beyond insult and
capture; while their sailors are full of confidence in the advantage
given them by this sort of vessel in time of war.’ He affirmed to me that
the great majority of the nation, if satisfied on the side of France, will
be much inclined to war with her rival; but that the mild, prudent, and
perhaps too timid administration of Mr. Jefferson heretofore, and now
that of Mr. Madison, had thus far repressed the national enthusiasm;
but he was convinced that under the administration, for example, of
the Vice-President General Clinton, or of any other statesman of his
character, war would have already broken out.”
This was not the only occasion when Robert Smith showed
himself to the French minister as restive under restraint.
“I asked him,” reported Serurier at another time,[45] “what the
Government expected to do if the English resented its pretension to
the independence of its flag? ‘War,’ he replied with perfect frankness,
‘is the inevitable result of our position toward the English if they refuse
to recognize our rights.’ Mr. Smith then admitted to me that his
Government certainly had the best founded hope that the
establishment of the regency in England would bring about a change
of ministry and probably of system, and that the Orders in Council
would be repealed; that in this case, neutral rights being re-
established, the motive for all this discussion would cease. But he
repeated to me that in the contrary case war would, in his eyes, be
inevitable, and that the Americans, in deciding on this course, had
perfectly foreseen where it would lead them, without being, on that
account, deterred from a decision dictated by their honor or their
interest.”
 These remarks were made February 17, the day when the
President decided to accept Napoleon’s conditions; and they helped
to convince Serurier that Robert Smith was more “continental,” or
Napoleonic, than Gallatin. For this reason, when he heard that
Gallatin had prevailed, and Smith was to take the Russian Mission,
he wrote to his Government with regret:[46]—
“The Secretary of State has taken his resolution like a man of
courage. Instead of sulking and going to intrigue in his province, he
has preferred to remain attached to the government of his country,
and to go for some time to enjoy the air of our Europe, whither his
tastes lead him, and to reserve himself for more favorable
circumstances. His frank and open character makes him generally
regretted. I think he must have had a share at the time in the fit of
energy which his Government has shown. His language was
measured; but very certainly his system drew him much nearer to
France than to England.”
Perhaps Serurier was misled by Robert Smith’s habit of taking
tone from the person nearest him; but as the French minister learned
more of Monroe, his regrets for Smith became acute. “I regard as an
evil,” he wrote, April 5,[47] “the removal of a man whose elevated
views,—noble in foreign policy at least,—and whose decided
character, might have given to affairs a direction which must be at
least counteracted by his absence, and especially by the way in
which his place is filled.”
Monroe took charge of the State Department April 1, and within a
few days Serurier became unpleasantly conscious of the change. He
still met with civility, but he felt new hesitation. Joel Barlow had been
appointed minister to France, and should have started instantly for
his post. Yet Barlow lingered at Washington; and when Serurier
asked the reason of the delay, Monroe merely said he was waiting
for the arrival of the frigate “Essex” with despatches from France and
England to the middle of April. The expected despatches did not
arrive until July; and in the interval Serurier passed a season of
discomfort. The new Secretary of State, unlike his predecessor,
showed no admiration for Napoleon. Toward the end of June, the
French consuls in the United States made known that they were still
authorized and required by the Emperor to issue permits or
certificates to American vessels destined for France. Monroe sent at
once for Serurier, and admonished him in language that seemed to
the French minister altogether out of place:[48]—
“Mr. Monroe’s countenance was absolutely distorted (tout-à-fait
décomposeé). I could not conceive how an object, apparently so
unimportant, could affect him so keenly. He continued thus: ‘You are
witness, sir, to the candor of our motives, to the loyalty of our
principles, to our immovable fidelity to our engagements. In spite of
party clamor and the extreme difficulty of the circumstances, we
persevere in our system; but your Government abandons us to the
attacks of its enemies and ours, by not fulfilling on its side the
conditions set forth in the President’s proclamation. We are daily
accused of a culpable partiality for France. These cries were at first
feeble, and we flattered ourselves every day to be able to silence
them by announcing the Emperor’s arrangements in conformity with
ours; but they become louder by our silence. The Administration finds
itself in the most extreme embarrassment (dans le plus extrême
embarras); it knows neither what to expect from you, nor what to say
to its constituents. Ah, sir!’ cried Mr. Monroe, ‘if your sovereign had
deigned to imitate the promptness (empressement) which our
President showed in publishing his proclamation; if he had re-opened,
with the necessary precautions, concerted with us, his ports and his
vessels,—all the commerce of America was won for France. A
thousand ships would have sailed at all risks to your ports, where they
would have sought the products of your manufactures which are so
much liked in this country. The English would have certainly opposed
such a useful exchange between the two peoples; our honor and
interest would have united to resist them; and the result, for which you
are doubtless more desirous than you admit, could not have failed to
happen at last.’”
Serurier tried, in vain to soothe the secretary; Monroe was not to
be appeased. Oratory so impassioned was not meant for mere
show; and as causes of grievance multiplied, the secretary gathered
one after another, evidently to be used for a rupture with France.
Each stage toward his end he marked by the regular shade of
increasing displeasure that he had himself, as a victim, so often
watched. Enjoying the pleasure of doing to others what Cevallos and
Harrowby, Talleyrand and Canning had done to him, Monroe, familiar
with the accents of the most famous school in European diplomacy,
ran no risk of throwing away a single tone.
 When the secretary told Serurier that Joel Barlow’s departure
depended on the news to be brought by the “Essex,” he did not add
that he was himself waiting for the arrival of Foster, the new British
minister; but as it happened, Foster reached Washington July 1, at
the same instant with the despatches brought by the “Essex.” The
crisis of Serurier’s diplomatic fortune came with the arrival of Foster,
and during the next two weeks the French minister passed through
many uncomfortable scenes. He knew too little of American affairs to
foresee that not himself, but Monroe, must in the end be the victim.
As soon as the “Essex” was announced, bringing William Pinkney
from London and Jonathan Russell’s despatches from Paris,—
including his report of Napoleon’s tirade to the Paris merchants, but
no sign that his decrees were repealed,—Serurier called at the
Department to learn what Monroe had to say. “I found him icy; he
told me that, contrary to all the hopes of the Government, the ‘Essex’
had brought nothing decisive, and asked if I was more fortunate.”[49]
Serurier had despatches, but as the story has shown[50] they were
emphatic in forbidding him to pledge himself in regard to the
Emperor’s course. Obliged to evade Monroe’s inquiry, he could only
suggest hopes of more decisive news by the next arrival, and then
turned the subject to Napoleon’s zeal in revolutionizing Spanish
America:—
“I was heard with politeness, but coldly. Then I talked of the abrupt
and improper tone of Mr. Russell’s correspondence. I said that it did
not offend, because Mr. Russell was not of enough consequence to
give offence; but that it was considered altogether indecorous. I made
him aware, on this occasion, of the necessity that the Republic should
have a minister at Paris. Mr. Monroe answered that the Government
had already made that remark; he repeated to me that he had
intended, long before, to send away Mr. Barlow, but that the daily
expectation of despatches from France had made him always delay.
Here he stopped himself, and returned for the tenth time upon the
difficult position of the Government; upon the universal outcry of
commerce, which would become a kind of revolt in the North if the
Government could offer nothing to counteract it. He recalled to me the
effect produced by the announcement of new licenses issued at
Boston and Baltimore, and the equally annoying effect of a pamphlet
by the ex-Secretary of State, Mr. Smith, which revealed to the public
the declaration made by me on my arrival, that the old confiscations
 made by way of reprisals, could not be matter of discussion,
—‘information,’ said he, ‘which had at the time profoundly afflicted the
Administration, and which it had counted on publishing only at the
moment when it could simultaneously announce a better outlook, and
the absolute restoration of commercial relations.’ He ended, at last,
this conference by telling me that he had not yet finished reading all
his papers; that the Government was that moment deliberating on its
course, and that in a few days we would have a new conference.”
Serurier felt his danger, and expected to be sacrificed. Society
turned against him. Even Duane became abusive of France.
“Already, within a few days, I notice a change in the manners of
every one about me. The general attention of which I was the object
during the first five months has been suddenly followed by a general
reserve; people are civil, but under a thousand pretexts they avoid
being seen in conversation with me. The journals hitherto most
favorable to France begin to say that since we will not keep our
engagements, a rupture must take place.”
Thinking that he had nothing to lose, the French minister took a
high tone, and July 3, through a private channel, conveyed to the
President a warning that the course threatened might lead too far.
“The person in question having answered that I might depend on
the Government’s fidelity to its engagements, I replied that I would
believe it all if the new American minister should be despatched to
Paris, and that I would believe nothing if this departure were again
postponed.”
Everything depended on Foster, who had been received by the
President July 2, the day before Serurier’s message was sent.
Apparently, the first impression made by Foster’s letters and
conversation was decisive, for Monroe told the French minister at the
public dinner of July 4, that Barlow was to start at once on his
mission.
“This news,” reported Serurier, “caused me great pleasure. This
success, though doubtless inconsiderable, made all my ambition for
the moment; it delays for several months the crisis that the English
party was trying to force, in the hope of making it decisive against us;
it neutralizes the effect of the arrival of the British minister, whose
want of influence down to this point it reveals; it withdraws the
 initiative from the President and restores to his Majesty the decision of
our great affairs.”
No sooner had this decision been made, than Monroe seemed to
repent it. The conduct of France had been of late more outrageous
than that of England; and Monroe, who found his worst expectations
fulfilled, could not easily resign himself to accepting a yoke against
which he had for five years protested. The departure of Barlow,
ordered July 4, was countermanded July 5; and this proof of
Monroe’s discontent led to a striking interview, July 9, in which the
Secretary of State became more impassioned than ever.[51] Serurier
began by asking what he was to think of the Government’s conduct.
Monroe replied by recalling what had happened since the
appointment of Barlow as minister to France, a fortnight after
Serurier’s arrival. Then the Proclamation of November 2 had been
supposed sufficient to satisfy the Emperor; the Non-intercourse Act
followed,—yet the President was still waiting for the assurance that
the French Decrees were repealed, without which knowledge
Barlow’s instructions could not be written.
“So we reached the day when the ‘Essex’ arrived,” continued
Monroe. “Not an officer of the government, not a citizen in the
Republic, but was convinced that this frigate brought the most
satisfactory and the most decisive news. Yet to our great
astonishment—even to our confusion—she has brought nothing. In
spite of a deception so afflicting, the President had still decided to
make a last attempt, and this was to send off Mr. Barlow. I had the
honor to announce it to you; but on the news of our frigate’s arrival
without satisfactory information from France, a general cry of
discontent rose all over the Republic, and public opinion pronounced
itself so strongly against Mr. Barlow’s departure that the Government
can to-day no longer give the order without raising from all parts of the
Union the cry of treason. I am myself a daily witness of the general
effervescence that this silence of your Government excites. I cannot
walk from my house to this office without being accosted by twenty
citizens, who say to me: ‘What, sir! shall you send off a minister to
France, when the Imperial government shows itself unwilling to carry
out its’ engagements; when it treats our citizens with so much
injustice, and you yourself with so much contempt? No! the honor of
the Republic will not permit you to send your ambassador under such
circumstances, and you will be responsible for it to the country.’”
 Monroe’s objection seemed reasonable. The sending a new
minister to France was in no way necessary for making an issue with
England. Indeed, if only a simple issue with England had been
wanted, the permanent presence of British frigates off Sandy Hook,
capturing American vessels and impressing American seamen, was
sufficient. No further protest against it needed to be made, seeing
that it had been the subject of innumerable protests. If President
Madison wanted an issue that should oblige Great Britain to declare
war, or to take measures equivalent to war, he could obtain it in a
moment by ordering Rodgers and Decatur to drive the British frigates
away and rescue their victims. For such a purpose he needed no
minister in France, and had no occasion to make himself a party to
fraud. Monroe’s language implied that he would have preferred some
such issue.
“‘Believe me,’ said Mr. Monroe in finishing, and as we were about
to separate, ‘the American government will not be inconsequent; but
its patience is exhausted, and as regards foreign Powers it is
determined to make itself respected. People in Europe suppose us to
be merchants, occupied exclusively with pepper and ginger. They are
much deceived, and I hope we shall prove it. The immense majority of
citizens do not belong to this class, and are, as much as your
Europeans, controlled by principles of honor and dignity. I never knew
what trade was. The President is as much of a stranger to it as I; and
we accord to commerce only the protection that we owe it, as every
government owes it to an interesting class of its citizens.’”
Commerce would have listened with more amusement than
conviction to Monroe’s ideas on the “principles of honor and dignity”
which led a government of Virginia and Pennsylvania farmers to
accord protection in the form of embargoes and non-intercourses to
commerce which it distrusted and despised; but Monroe meant only
that France, as well as England, must reckon on a new national spirit
in Virginia,—a spirit which they had themselves roused, and for
whose bad qualities they had only themselves to blame.
Yet Monroe found himself in an attitude not flattering to his pride.
All his life a representative of the Virginia school,—more
conservative than Jefferson, and only to be compared with John
Randolph, and John Taylor of Caroline,—he had come to the State
Department to enforce his own principles and overrule the President;
but he found himself helpless in the President’s hands. That the
contest was in reality between Monroe’s will and Madison’s became
clear to Serurier; and that Monroe’s pliable nature must succumb to
Madison’s pertinacity, backed as it was by authority, could not be
doubtful. Six months seemed to Virginians a short time for Monroe’s
submission, but in truth Monroe had submitted long before; his
rebellion itself had been due to William Pinkney and John Randolph
rather than to impulses of his own; he regretted it almost as soon as
it was made, and he suffered little in allowing Madison to control the
course of events. Yet he would certainly have preferred another
result, and his interview with Serurier, July 9, recorded the policy he
had meant to impose, while preparing for its abandonment.
The secretary waited only for a pretext to accept Madison’s
dogma that the French Decrees were withdrawn, although his
conversations with Serurier proved his conviction to the contrary. A
few days later, a vessel arrived from England bringing unofficial
news from France, to May 24, that the Emperor had released the
American vessels kept in sequestration since November 1, and had
admitted their cargoes for sale. Without the form of further struggle,
Monroe followed the footsteps of his predecessor.
“The Secretary of State sent for me three days ago to his office,”
wrote Serurier, July 20.[52] “After having congratulated me on this
decision [of the Emperor], he told me that he had no doubt of its
producing on the public the same excellent impression it had made
on the Government; but he added that as it was not official, the
President would like to have me write a letter as confirmative as
possible, in the absence of instructions, both of these events and of
his Majesty’s good intentions; and that if I could write him this letter,
Mr. Barlow should immediately depart.”
The only instructions possessed by Serurier on the subject of the
decrees warned him against doing what Monroe asked; but the
temptation to win a success was strong, and he wrote a cautious
letter,[53] dated July 19, saying that he had no official knowledge on
the subject, but that “it is with reason, sir, that you reject the idea of a
doubt on the fidelity of France in fulfilling her engagements; for to
justify such a doubt one must have some contradictory facts to cite,
—one must show that judgments have been rendered in France on
the principle of maintaining the Decrees of Berlin and Milan, or that a
series of American ships coming from England to America, or from
America to England, have been captured by our privateers in virtue
of the blockade of the British Isles. Nothing of the sort has become
known to any of us, and, on the contrary,” all advices showed that
the decrees in France and on the ocean had ceased to affect
American commerce.
Probably this letter disappointed the President, for it was never
published, nor was any allusion made to it in the correspondence
that followed. Without even such cover, Monroe ordered Barlow to
depart, and made the decision public. Serurier, puzzled though
delighted by his success, groped in the dark to discover how the
Government had reached its decision. Foster’s attitude failed to
enlighten him; and he could see no explanation, except that the
result was a personal victory of Madison over Monroe and the
Cabinet.
“The joy is general among the authorities,” he wrote July 20,[54]
“except among some friends of Mr. Foster; but more than any one
else, Mr. Madison seems enchanted to see himself confirmed
(raffermi) in a system which is wholly his own, but which he began to
see no means of maintaining. I do him the justice to say that if he had
a movement of hesitation on the point of Mr. Barlow’s departure, it
was more the effect of public clamor than of his own sentiments,—a
movement of spite (dépit) and discouragement, rather than of
inclination toward England, which he frankly detests, as does his
friend Mr. Jefferson,—and that he has not been for a moment
unfaithful to his engagements with us. I have never seen him more
triumphant. The Secretaries of State, of the Treasury, and of War are
doubtful, perhaps, and conduct themselves more according to events;
but happily the President, superior to them in enlightenment as in
position, governs entirely by himself, and there is no reason to fear his
being crossed by them.”
Serurier knew Madison and Jefferson only as a Frenchman
might, and his ideas of their feelings toward England were such as a
Frenchman could understand. In truth, Madison did not want a
distinct issue of peace or war with England. Had he wished for such
an issue, he would have made it. Disbelieving in war, as war
approached, he clung to the last chances of peaceful coercion. The
fiction that Napoleon’s decrees were repealed enabled him to
enforce his peaceful coercive measures to avoid war. Not because
he wanted war, but because he wanted peace, Madison insisted that
the decrees were withdrawn. As he carried each point, he stood
more and more alone; he was misunderstood by his enemies and
overborne by his friends; he failed in his policy of peace, and knew
himself unfit to administer a policy of war. Yet he held to his principle,
that commercial restrictions were the true safeguards of an American
system.
A man of keen intelligence, Madison knew, quite as well as
Monroe, Serurier, or Foster, that the French Decrees were not
repealed. His alleged reason for despatching Barlow was
unsatisfactory to himself as to Monroe, and doubly worthless
because unofficial. Even while he insisted on his measures, he made
no secret of his discontent. When official despatches arrived a few
days later, Serurier was puzzled at finding Madison well aware that
the Emperor had not withdrawn and did not mean to withdraw his
decrees. July 23 Serurier communicated[55] to Monroe the
substance of the despatches from France. The next day he called at
the Department and at the White House to watch the effect of his
letter, which announced the admission of American merchandise into
French ports.
“Mr. Monroe showed himself less satisfied than I had hoped, either
because the President had so directed, in order to reserve the right of
raising new pretensions, or because, already advised by Mr. Russell,
he had been at the same time informed that the prizes made since
November by our privateers were not restored; and these restrictions
had been represented in an unfavorable light by the chargé d’affaires.
He confined himself to telling me that certainly there were things
agreeable to the American government in the Emperor’s
arrangements, but that there were others wholly contrary to
expectation, and that before his departure he would send me a list of
the complaints left unsatisfied.. .. As the President is to start to-
morrow for his estate in Virginia, I called this morning to bid him good-
by. I had on this occasion with Mr. Madison an interview which put the
 last stroke to my suspicions. When I told him that I was glad to see
him a last time under auspices so happy as the news I had officially
given him the evening before, he answered me that he had learned
with pleasure, though without surprise, the release of the sequestered
ships and the Emperor’s decision to admit American products; but that
one thing pained him profoundly. This was that the American ships
captured since last November, under pretext of the Berlin and Milan
Decrees, had not been released with those which voluntarily entered
French ports; and he pretended that this failure to execute the chief of
our engagements destroyed the effect of all the rest.”[56]
The opinion scarcely admitted dispute. Reversing Madison’s
theory, Napoleon had relieved American vessels from the “municipal
operation” of his decrees in France, while he enforced that
international operation on the high seas which alone Madison
declared himself bound by the law of nations to resist. The blockade
thus enforced by Napoleon against England was more extravagant
than any blockade England had ever declared. Of his acts in
Denmark and on the Baltic Madison took no notice at all, though
these, more than the detention of American prizes in France,
“destroyed the effect of all the rest.” If, then, the decrees were still
enforced on the ocean,—as Madison insisted they were,—they could
not have been repealed; and Madison, by submitting to their
enforcement on the ocean, not only recognized their legality, but also
required England to make the same submission, under penalty of a
declaration of war from the United States. This dilemma threatened
to overthrow Madison’s Administration, or even to break up the
Union. Serurier saw its dangers, and did his utmost to influence
Napoleon toward concessions:
“The revocation of the Decrees of Milan and Berlin has become a
personal affair with Mr. Madison. He announced it by proclamation,
and has constantly maintained it since. The English party never stops
worrying him on this point, and saying that he has been made a tool of
France,—that the decrees have not been repealed. He fears the effect
of this suspension, and foresees that it will cause great discussions in
the next Congress, and that it alone may compromise the
Administration, triumphant on all other points.”
Under such circumstances, Monroe needed more than common
powers in order to play his part. Talleyrand himself would have found
his impassive countenance tried by assuring Foster in the morning
that the decrees were repealed, and rating Serurier in the afternoon
because they were in force. Such conversations, extended over a
length of time, might in the end raise doubts of a statesman’s
veracity; yet this was what Monroe undertook. On the day when
Serurier communicated the news that disturbed the President,
Monroe sent to the British minister the note maintaining broadly that
France had revoked her decrees. Three days later, after the
President had told Serurier that “the failure to execute the chief of
our engagements destroyed the effect of all the rest,” Monroe gave
to Barlow his instructions founded on the revocation of the decrees.
Doubtless this double-dealing exasperated all the actors concerned
in it. Madison and Monroe at heart were more angry with France
than with England, if indeed degrees in anger could be felt where the
outrages of both parties were incessant and intolerable. Yet Barlow
took his instructions and set sail for France; a proclamation
appeared in the “National Intelligencer” calling Congress together for
November 1; and the President and his Secretary of State left
Washington for their summer vacation in Virginia, having accepted,
once for all, the conditions imposed by Napoleon.
For some years afterward Monroe said no more about old
Republican principles; but twelve months later he wrote to Colonel
Taylor a letter[57] which began with a candid confession:—
“I have been afraid to write to you for some time past, because I
knew that you expected better things from me than I have been able
to perform. You thought that I might contribute to promote a
compromise with Great Britain, and thereby prevent a war between
that country and the United States; that we might also get rid of our
restrictive system. I own to you that I had some hope, though less
than some of my friends entertained, that I might aid in promoting that
desirable result. This hope has been disappointed.”
SMITHSONIAN INSTITUTION BUREAU OF ETHNOLOGY,
J. W. POWELL, DIRECTOR.
 MAP OF
THE
STATE OF INDIANA
Exhibiting the Lands ceded by the
Indian Tribes
TO THE
UNITED STATES
BY
C. C. ROYCE

CESSIONS OF INDIAN TERRITORY IN INDIANA,

1795–1810.
1. Tract ceded by Treaty of Greenville, August 3rd, 1795.
2. Tract about Fort Wayne, ceded by the same Treaty.
3. Two miles square on the Miami portage, ceded by the same
Treaty.
4. Six miles square at Old Wea Town on the Wabash, ceded by the
same Treaty.
5. Clark’s Grant on the Ohio, reserved by the same Treaty.
6. Vincennes tract, reserved by the same Treaty.
7. Tract ceded by Treaties of August 18th and 27th, 1804.
8. Tract ceded by Treaty of August 21st, 1805.
9, 10, 11. Tracts ceded by Treaty of September 30th, 1809.
12. Tract ceded by Treaty of December 9th, 1809.
 CHAPTER IV.
Although no one doubted that the year 1812 was to witness a
new convulsion of society, if signs of panic occurred they were less
marked in crowded countries where vast interests were at stake,
than in remote regions which might have been thought as safe from
Napoleon’s wars as from those of Genghis Khan. As in the year
1754 a petty fight between two French and English scouting parties
on the banks of the Youghiogheny River, far in the American
wilderness, began a war that changed the balance of the world, so in
1811 an encounter in the Indian country, on the banks of the
Wabash, began a fresh convulsion which ended only with the fall of
Napoleon. The battle of Tippecanoe was a premature outbreak of
the great wars of 1812.
Governor William Henry Harrison, of the Indiana Territory, often
said he could tell by the conduct of his Indians, as by a thermometer,
the chances of war and peace for the United States as estimated in
the Cabinet at London. The remark was curious, but not surprising.
Uneasiness would naturally be greatest where least control and most
irritation existed. Such a region was the Northwestern Territory. Even
the spot where violence would break out might be predicted as
somewhere on the waterline of the Maumee and the Wabash,
between Detroit at one extremity and Vincennes at the other. If a
guess had been ventured that the most probable point would be
found on that line, about half way between Lake Erie and the Ohio
River, the map would have shown that Tippecanoe Creek, where it
flowed into the Wabash, corresponded with the rough suggestion.
The Indiana Territory was created in 1800; and the former
delegate of the whole Northwestern Territory, William Henry
Harrison, was then appointed governor of the new division. Until the
year 1809, Illinois formed part of the Indiana Territory; but its single
settlement at Kaskaskia was remote. The Indiana settlement
consisted mainly of two tracts,—one on the Ohio, opposite Louisville
in Kentucky, at the falls, consisting of about one hundred and fifty
thousand acres, called Clark’s Grant; the other, at Vincennes on the
Wabash, where the French had held a post, without a definite grant
of lands, under an old Indian treaty, and where the Americans took
whatever rights the French enjoyed. One hundred miles of
wilderness separated these two tracts. In 1800, their population
numbered about twenty-five hundred persons; in 1810, nearly
twenty-five thousand.
Northward and westward, from the bounds of these districts the
Indian country stretched to the Lakes and the Mississippi, unbroken
except by military posts at Fort Wayne and Fort Dearborn, or
Chicago, and a considerable settlement of white people in the
neighborhood of the fortress at Detroit. Some five thousand Indian
warriors held this vast region, and were abundantly able to expel
every white man from Indiana if their organization had been as
strong as their numbers. The whites were equally eager to expel the
Indians, and showed the wish openly.
Governor Harrison was the highest authority on matters
connected with the northwestern Indians. During eight years of
Harrison’s government Jefferson guided the Indian policy; and as
long as Jefferson insisted on the philanthropic principles which were
his pride, Harrison, whose genius lay in ready adaptation, took his
tone from the President, and wrote in a different spirit from that
which he would have taken had he represented an aggressive chief.
His account of Indian affairs offered an illustration of the law
accepted by all historians in theory, but adopted by none in practice;
which former ages called “fate,” and metaphysicians called
“necessity,” but which modern science has refined into the “survival
of the fittest.” No acid ever worked more mechanically on a
vegetable fibre than the white man acted on the Indian. As the line of
American settlements approached, the nearest Indian tribes withered
away.
Harrison reported conscientiously the incurable evils which
attended the contact of the two hostile forms of society. The first, but
not the most serious, was that the white man, though not allowed to
settle beyond the Indian border, could not be prevented from
trespassing far and wide on Indian territory in search of game. The
practice of hunting on Indian lands, in violation of law and existing
treaties, had grown into a monstrous abuse. The Kentucky settlers
crossed the Ohio River every autumn to kill deer, bear, and buffalo
for their skins, which they had no more right to take than they had to
cross the Alleghanies, and shoot or trap the cows and sheep in the
farm-yards of Bucks County. Many parts of the Northwestern
Territory which as late as 1795 abounded in game, ten years
afterward contained not game enough to support the small Indian
parties passing through them, and had become worthless for Indian
purposes except as a barrier to further encroachment.[58]
The tribes that owned these lands were forced either to remove
elsewhere, or to sell their old hunting-grounds to the government for
supplies or for an annuity. The tribes that sold, remaining near the
settlements to enjoy their annuity, were more to be pitied than those
that removed, which were destined to destruction by war. Harrison
reported that contact with white settlements never failed to ruin them.
“I can tell at once,” he wrote in 1801,[59] “upon looking at an Indian
whom I may chance to meet, whether he belongs to a neighboring or
to a more distant tribe. The latter is generally well-clothed, healthy,
and vigorous; the former half-naked, filthy, and enfeebled by
intoxication, and many of them without arms excepting a knife, which
they carry for the most villanous purposes.” Harrison estimated the
number of Indian warriors then in the whole valley of the Wabash as
not exceeding six hundred; the sale of whiskey was unlawful, yet
they were supposed to consume six thousand gallons of whiskey a
year, and their drunkenness so often ended in murder that among
three of the tribes scarcely a chief survived.
“I have had much difficulty,” wrote Harrison in the same letter from
Vincennes, “with the small tribes in this immediate neighborhood;
namely the Piankeshaws, the Weas, and the Eel River Miamis. These
three tribes form a body of the most depraved wretches on earth.
They are daily in this town in considerable numbers, and are
frequently intoxicated to the number of thirty or forty at once, when
they commit the greatest disorders, drawing their knives and stabbing
every one they meet with; breaking open the houses of the citizens,
killing their cattle and hogs, and breaking down their fences. But in all
their frolics they generally suffer the most themselves. They kill each
other without mercy. Some years ago as many as four were found
 dead in a morning; and although those murders were actually
committed in the streets of the town, yet no attempt to punish them
has ever been made.”
The Piankeshaws were reduced to twenty-five or thirty warriors;
the Weas and Eel River Indians were mere remnants. The more
powerful tribes at a distance saw with growing alarm the steady
destruction of the border warriors; and the intelligent Indians
everywhere forbade the introduction of whiskey, and tried to create a
central authority to control the degraded tribes.
A third evil was much noticed by Harrison. By treaty, if an Indian
killed a white man the tribe was bound to surrender the murderer for
trial by American law; while if a white man killed an Indian, the
murderer was also to be tried by a white jury. The Indians
surrendered their murderers, and white juries at Vincennes hung
them without scruple; but no jury in the territory ever convicted a
white man of murdering an Indian. Harrison complained to the
President of the wanton and atrocious murders committed by white
men on Indians, and the impossibility of punishing them in a society
where witnesses would not appear, criminals broke jail, and juries
refused to convict. Throughout the territory the people avowed the
opinion that a white man ought not in justice to suffer for killing an
Indian;[60] and many of them, like the uncle of Abraham Lincoln,[61]
thought it a virtuous act to shoot an Indian at sight. Harrison could
combat this code of popular law only by proclamations offering
rewards for the arrest of murderers, who were never punished when
arrested. In 1801 the Delawares alone complained of six unatoned
murders committed on their tribe since the Treaty of Greenville, and
every year increased the score.
“All these injuries,” reported Harrison in 1801, “the Indians have
hitherto borne with astonishing patience; but though they discover no
disposition to make war on the United States at present, I am
confident that most of the tribes would eagerly seize any favorable
opportunity for that purpose; and should the United States be at war
with any of the European nations who are known to the Indians, there
would probably be a combination of more than nine tenths of the
Northern tribes against us, unless some means are used to conciliate
them.”