Why does business fear sudden changes in government policies?

Business fears sudden changes in government policies because
firms need to plan. Firms need to have assumptions on which they can base their planning instead
of simply not knowing what will happen.

For example, imagine that
you owned an oil company that wanted to invest in Venezuela. When you consider doing this, you
would have to understand that you would be putting a lot of money into your investment. Now
consider the government of that country. At any moment, Hugo Chavez might change the laws and
either take your equipment or reduce the amount of profit you are allowed to make. You would fear
this because your ability to do business might be radically altered without any
warning.

This is an extreme case, of course. But the same thing can
happen on a much smaller scale even in countries that are more stable. Imagine if you were
investing in wind power in the US. You would fear what might happen if Republicans come to power
and suddenly cut subsidies to wind power.

Government decisions can
have a huge impact on the business environment. Firms need to know that their environment will
remain stable so they can plan. Therefore, they fear sudden changes in policy that will upset
their plans and can cause them to lose money.