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29 J. Conflict Resol. 3 (1985)

handle is hein.journals/jcfltr29 and id is 1 raw text is: Diffusion as an Explanation of Oil Nationalization OR THE DOMINO EFFECT RIDES AGAIN STEPHEN J. KOBRIN Graduate School of Business New York University Following Rogers, diffusion is defined as a process of social communication involving information flows under uncertainty. The international petroleum industry is a complex social system with considerable uncertainty about existing structural conditions, particu- larly from the point of view of a developing country. The demonstration effect of oil production nationalizations has been an important source of information about the balance of country-company power. The Mexican (1938) and Iranian (1951) nationaliza- tions inhibited further takeovers by demonstrating that the companies had the power to discipline nationalizing countries by isolating them from international markets. The North African nationalizations of 1971 were disinhibiting as they demonstrated that underlying structural conditions had changed to the point where industry sanctions were no longer effective. The diffusion hypothesis is tested empirically and shown to be consistent with the data. Arguing for the amendment to the Foreign Assistance Act of 1962 that bears his name, Senator Hickenlooper warned, success in expropriation in one country would stimulate expropriation in other countries by dissident groups. The spreading wave of expropriation was compared to a prairie fire that must be extinguished to protect the sanctity and security of American investment in Latin America (quoted in Rodman, 1983: 263). He was not the first or the last to suggest that successful nationalizations would produce a demonstration, or domino AUTHOR'S NOTE: I would like to thank David Jodice and Bruce Kogut for their comments. Manu Kalwani provided a good deal of help with diffusion models longer ago than I care to remember. JOURNAL OF CONFLICT RESOLUTION, Vol. 29 No. 1, March 1985 3-32 a 1985 Sage Publications, Inc. 3 from the SAGE Social Science Collections. All Rights Reserved.

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