AbstractThis study provides empirical evidence on the perceptions of business managers on pertinent environmental variables affected by government control in a newly industrializing country. We document that the majority of surveyed firms are aware of the effect of government control on their activities. Managers perceive that political, legal, technological, and economic environments are potent sources of uncertainty (or value enhancement) for their firms as a result of government control. Furthermore, some firm‐and industry‐specific characteristics were found to buttress managers' perceptions of the effects of government control on their environments. To optimize foreign investments, these findings suggest that expanding firms strategically approach their entry into such foreign markets. © 1995 John Wiley&Sons,