Final answer:
Political risk has a direct effect on the ownership and control of foreign firms due to the long-term and managerial nature of foreign direct investment.
Step-by-step explanation:
Political risk can directly influence the ownership and control of foreign firms. When a company engages in foreign direct investment, it typically assumes some managerial responsibility and has a focus on long-term operations within the host country. Due to the involvement in management and operations, political risks such as changes in law, expropriation, or political instability, can greatly affect both ownership and the ability to control and manage the foreign firm. This situation is in contrast to portfolio investments, which can be withdrawn much more quickly and with less exposure to long-term political risk factors.
The final answer to whether political risk often has a direct effect on the ownership and control of the foreign firm is: a) True.