Neo-globalization with Diverse Strategic Options for Multinational Enterprises

The United States and China have been pursuing policies to decouple the two economies through trade restrictions, prioritizing national advancement and increasing self-sufficiency. This trend is reducing interdependencies between the two nations and their respective allies in attempts to “de-risk” the effects of tight economic and industrial couplings in cases of geopolitical turmoil and disruptive events. While this departs from conventional views in international business (IB), it also presents opportunities for global businesses that can respond to the changing conditions by pursuing a neo-globalization paradigm in a dynamic balance between globalization and de-globalization. A close analysis derives three (most) likely contextual decoupling scenarios determined by pressures from institutional compatibility and national security concerns. Multinational enterprises (MNEs) can adopt a multiplex governance strategy, configuring a portfolio of global business options with flexible entry and exit modes. They can engage in moderate bifurcation by operating in geopolitical regions that are only moderately exposed to security and institutional compatibility. They can also pursue strong bifurcation by operating in sectors and regions with high exposures to security and compatibility conflicts. This chapter considers the strategic implications for MNEs in this global environment and discusses research opportunities and theoretical extensions within the IB field.