Leaving the Backseat: The Active Role of Multinational Firms in China-US Decoupling

The decoupling between China and the United States has become a major topic in the context of deglobalization. Several studies have explored the factors that drive decoupling and analyzed its implications for multinational firms. However, in most cases, firms are portrayed as passive actors who are left to deal with the consequences of this process. To address this issue, we propose a framework that describes decoupling as a bargaining process between firms and states. We start by outlining a bilateral bargaining framework and then expand it to a bicentric framework involving firms and their home and host country governments. In this framework, decoupling is determined by relevance and agency. Relevance refers to whether governments want firms to decouple, and agency refers to whether firms can avoid doing so. Our exploratory data analysis shows that this framework aligns with the decoupling behavior of US multinational enterprises.