Firewalls or frontlines: Geopolitical tensions and multinationals' digital technology upgrading

Abstract

How do geopolitical tensions affect digital technology upgrading? Digital technology upgrading is widely recognized as a crucial driver of the Industry 4.0 era. As multinational enterprises (MNEs) increasingly seek to absorb or transfer cutting-edge digital technologies from overseas, the recent escalation of geopolitical tensions has introduced substantial uncertainty into this process. Drawing from the techno-geopolitical uncertainty literature in general and the geographic relational view in particular, this study explores how Chinese MNEs are impacted by the rise of geopolitical tensions in their efforts to transform digitally. Our findings reveal that geopolitical tensions between home and host countries adversely impact the digital technology depth and breadth of the focal firm. Also, these relationships are reinforced by the firm's contextual feature – state ownership. Yet the foreign presence of these MNEs positively moderates the relationship between geopolitical tensions and digital technology depth, but the effect is not observed for digital technology breadth. Our exploration of the interrelationships between geopolitical tensions, digital technologies, and firm governance advances the literature and provides practical implications for policymakers and managers in the new era of geopolitics.