Fragmentation in international business: A geographic-and-political perspective

Marking the twentieth anniversary of Rugman and Verbeke’s (2004) seminal work on regionalization, Verbeke et al. (2025) critically examine how geopolitical tensions, such as those between the U.S. and China, are reshaping regionalization and the global economic order. Extending this study, we argue that while the traditional regionalization perspective emphasizes geographic proximity as the primary driver of global economic fragmentation, recent geopolitical disruptions indicate that these fractures are increasingly aligning with political fault lines among nations. We develop a Geographic-and-Political (GAP) framework, juxtaposing geographic distance with political divergence between nation-states. We propose that political distance modifies the traditional relationship between geographic proximity and regionalization, creating varied effects in both intra-regional and inter-regional business activities. The regionalization effect is more likely to persist or even strengthen when geographic and political distances align, but may weaken or fail otherwise. This framework extends and operationalizes the perspectives in Verbeke et al. (2025), highlighting a new paradigm of fragmentation and opening up new research directions for the literature on regionalization and MNEs’ multipolar geo-strategies.