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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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