21 March 2005

Australian and US researchers have proposed a radical new way to examine the impacts of terrorism and the conditions that generate extreme vulnerability to terrorism.

Applying the breakthough scale-free analysis of complex networks, UQ Business School academics Dr John Steen and Professor Peter Liesch have shown that trade networks are surprisingly resilient in the face of accidental failures but extremely vulnerable to coordinated attacks.

Dr Steen said scale-free networks are characterised by the existence of hubs or nodes with massively more connections than other nodes.

“This is the dark side of globalisation,” Dr Steen said.

Dr Steen said the paradox of the successes of global economic growth was that “we have also created international trade and financial networks that can be targeted by the new international terrorism.”

“If you can identify densely networked institutions and have a means of disabling that network hub, the ramifications for international business are huge – the ripples will be felt across the world,” he said.

“Hitting the World Trade Centre towers on September 11, 2001 was probably not only about the sheer visibility of the target but also a successful attempt to disrupt global economic activity.

“If an attack could simultaneously knock out key financial centres such as London and Tokyo, the effects on the global economy could be devastating”.

Dr Steen said international businesses had to factor in the effects of actual terrorist attacks (impact on demand for consumer goods, interruption to movements across borders and transportation corridors, and disruption to natural market forces that were the basis of international exchange rates etc).

“They also have to factor the risk of future attacks into their ongoing trade and investment decisions.”

The researchers have developed a framework for further research that identifies the impact of measurable risk as well as interpreting the incalculable systemic effect of terrorism-related uncertainty on a company’s internationalisation decisions.

Dr Steen said despite the clear international business implications of terrorism events such as 9/11, very little research existed on the topic.

Dr Steen and Professor Peter Liesch have been working with US colleagues Associate Professor Gary Knight of Georgetown University, Washington and Associate Professor Michael Czinkota, of Florida State University.

Media: For further information contact:
• Dr John Steen, telephone (07) 3365 7147, email j.steen@business.uq.edu.au.

• Professor Peter Liesch telephone (07) 3365 7209, mobile 0438 138 455, email p.liesch@business.uq.edu.au.

• Cathy Stacey telephone (07) 3365 6179, mobile 0438 3395 38, email c.stacey@business.uq.edu.au