Research Summary Combining institutional polycentrism and resource dependence perspectives, we theorize that small-and-medium-sized enterprises' (SMEs) outward foreign direct investment (OFDI) depends on the types and levels of home institutional ties, and this relationship is moderated by technological resources. Analyzing a sample of 1123 Chinese listed SMEs from 2009 to 2019, we find that (1) SMEs with local political and industry association ties conduct fewer OFDI than those without such ties, (2) SMEs with central political ties conduct more OFDI than those without such ties, (3) SMEs' technological resources condition some of these relationships. We contribute to global strategy research by highlighting how different types and levels of institutional ties create dependencies that shape SMEs' OFDI, and how firms' technological resources moderate these effects.Managerial Summary This study offers practical guidance for SME managers operating in relationship-based environments. Our findings show that the value of home institutional ties varies by type and level, shaping how firms design their OFDI strategies. First, managers should carefully assess the various resources available via ties to different institutional centers and the expectations attached to those ties. For instance, local institutional ties provide various domestic resources valuable in the home market and involve pressures to contribute locally, while central political ties facilitate OFDI by offering resources that can be leveraged abroad and aligning firms' strategies with global agendas. Second, such strategic decisions depend on a balance between internal and external resources available to firms. Managers should flexibly balance ties and technological resources when developing OFDI strategies.
Research Summary We investigate how home-host geopolitical tension influences the divestment decisions of emerging market multinational enterprises (EMNEs) in advanced host markets. Institutional theory suggests that such tension generates legitimacy deficits that compel exit, whereas resource dependence theory points to incentives to stay and secure critical resources. We integrate these logics into a contingency framework. Using a longitudinal dataset of publicly listed Chinese high-tech multinationals from 2000 to 2021, we find that geopolitical tension is positively associated with the likelihood of divestment. This association is attenuated for firms with high technological capability and deep technological embeddedness in the host market, but amplified for those with greater home institutional support, which operates as a liability rather than as a shield. Comparative case studies of forced divestment and contested stay corroborate these findings.Managerial Summary Geopolitical tensions present managers of EMNEs with a critical dilemma: whether to divest from advanced markets or to maintain operations despite hostility. Our study of Chinese high-tech firms reveals that while rising geopolitical tension generally accelerates divestment, a firm's strategic positioning can alter this outcome. We find that firms with strong technological capabilities or deep technological embeddedness in the host market are better positioned to resist exit pressures. These attributes create mutual dependencies that can turn local stakeholders into de facto allies who lobby against restrictive policies. However, managers should be cautious about relying on home institutional support when bilateral relations deteriorate. Rather than providing a shield, such support can mark the firm as a political agent, thereby amplifying its legitimacy deficits.
Abstract Research Summary The resurgence of geopolitical rivalry is challenging core assumptions of global strategy theory. Long‐standing views that economic interdependence is inherently beneficial, governments act as rule setters, multinational enterprises operate autonomously, and market and political strategy are separate no longer capture today's international business environment. We argue that, in an era of politicized interdependence, governments increasingly act as system‐level strategists, using economic statecraft to shape multinational enterprises and global value chains in pursuit of economic security. Consequently, economic interdependence has become a source of both prosperity and strategic vulnerability, firm autonomy is constrained by government priorities, and competitive advantage depends on integrating market and political strategy. We develop a framework distinguishing strategic sectors characterized by state co‐strategizing from non‐strategic sectors where market logics continue to dominate. Managerial Summary This article argues that recent geopolitical tensions are reshaping how multinational companies operate globally. Traditionally, global strategy theories assumed that governments mainly created stable rules while firms independently pursued efficiency and growth. The paper shows that this assumption no longer fully holds. Especially in strategic sectors, governments use public policy actions to reshape international business with the aim of strengthening their country's economic security. For managers in strategic sectors, this means that geopolitical considerations cannot merely be treated as an external risk managed by compliance or government affairs teams. They must more deeply integrate their political strategies with their competitive strategy.
Research Summary In their Point article, Van Assche and Lindner argue that recent geopolitical developments require revisiting theoretical assumptions underlying global strategy research. We question both the scope of the empirical changes they describe and the implication that existing frameworks have become inadequate. Rising state activism is significant but uneven across countries and sectors. Calls for revising core assumptions risk conflating contextual shifts with theoretical limitations. We argue that established theoretical traditions remain valuable when applied with conceptual precision and empirical discipline. We illustrate this using new internalization theory to explain firm-state interaction under geopolitical volatility. We then outline five pathways for engaging with existing theory to address empirical shifts, drawing on concrete examples of classic strategy and international business theories. Managerial Summary: Today's global business environment is more politically charged and less predictable than in recent decades. Governments are intervening more actively, geopolitical tensions are reshaping supply chains, and multinational enterprises (MNEs) face growing pressure from regulators and society. Our study argues that these changes do not make existing global strategy frameworks obsolete. Rather, they make them more necessary. Established ideas continue to help managers organize cross-border operations under uncertainty, manage complex interdependencies with governments and partners, and respond strategically to increasingly turbulent environments. The practical message is that MNE managers do not need an entirely new toolkit to navigate current disruption. In their strategic planning, managers need to apply existing strategic tools more carefully, broadly, and consistently.
Research Summary Under what conditions do headquarters replace the general manager (GM) of an underperforming subsidiary? We argue that translating performance feedback into managerial intervention requires an inferential step the behavioral theory of the firm has only partially theorized. Headquarters must attribute shortfalls to managerial agency, and the diagnosticity of performance cues is shaped by organizational separateness within multinational enterprises (MNEs). Using data on 891 foreign market-seeking subsidiaries of Japanese MNEs (1991-2020), we find that subsidiary underperformance increases GM turnover. However, this relationship is contingent and non-uniform. It weakens with cultural distance between headquarters and subsidiaries (spatial separateness) and strengthens when a regional headquarters (RHQ) is present (stratal separateness). These findings extend behavioral theory to the international context by highlighting how organizational separateness shapes managerial turnover in MNEs.Managerial Summary When foreign subsidiary performance falls short of expectations, headquarters must decide whether to replace the subsidiary's general manager (GM). Using data from 891 foreign market-seeking subsidiaries of Japanese multinational enterprises, we find that underperformance increases the likelihood of GM turnover. However, this relationship is not the same across all subsidiaries. Headquarters are less likely to respond to underperformance with leadership changes when subsidiaries operate in culturally distant countries, but more likely to do so when a regional headquarters (RHQ) is present. For managers, these findings suggest that performance-based leadership decisions are shaped not only by results, but also by the organizational structures and relationships through which headquarters evaluate subsidiary performance.
