When governments act as strategists: Geopolitical turmoil and global strategy theory

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.