A new paper published in Global Strategy Journal develops a geopolitical-economic order framework that suggests that the extent of geopolitical competition incentivizes states to create one of two types of economic order: a market-based order built on laissez-faire and mutually beneficial voluntary exchanges, and a state-based order focused on state power and government intervention in the economy. Understanding which order a firm operates in is crucial for managers of multinational enterprises (MNEs) because each rewards different strategies and sources of competitive advantage.
The research team, Daniel J. Blake of IE University in Madrid, Srividya Jandhyala of ESSEC Business School in Singapore, and Quan Li of Texas A&M University and Princeton University, were looking to better make sense of the changing global political environment for companies. They found there isn’t a clear picture of what geopolitical risk really is and how it shapes global companies, so they wanted to determine a common foundation for scholars and managers to decipher how geopolitics shapes global companies' strategies.
“Management and international business scholars often borrow big theories or paradigms from international relations to make sense of the impact of geopolitics for business,” the researchers say. “But those theories and paradigms often have conflicting assumptions and claims.”
The team chose to return to the first principles and basics of international relations: Anarchy is what makes international politics different from domestic politics, and because there’s no world government to safe-guard countries’ interests, governments prioritize geopolitics.
“This creates an incentive to cooperate at times and compete at others, which, in turn, shapes the state-market relationship that global companies encounter,” the researchers explain.
When governments perceive a greater threat to their countries and heightened geopolitical competition, they’re more likely to intervene in MNEs’ affairs, which increases transaction costs. This prompts a state-based order.
But when geopolitical competition is more muted, governments may promote cross-border investments by lowering barriers to entry, limiting discrimination against foreign firms, securing MNEs' property rights, and aligning regulations. This fosters a market-based order.
The type of order determines how an MNE should strategize. In a state-based order, firms’ competitive advantage comes from their bargaining power and corporate nationality. They should highlight their relevance to the host country's national goals and mitigate security concerns. Large firms or those from more powerful home countries are most likely to succeed. In a market-based order, MNEs focus heavily on exploiting global efficiencies. And because firms from both powerful and non-powerful home countries can compete in the global marketplace, the scope for strategic success is broad.
The two orders reward different sources of competitive advantage, thus incentivizing companies to utilize different market and non-market strategies, while also suggesting different scopes for strategic success. There are, however, times when geopolitics are in a transitory state, and firms can struggle to determine the prevailing state-market relationship. In this case, when the future is unclear, the researchers find that firms can prioritize strategic flexibility, redundancy, and resilience.
To read the full context of the study and its methods, access the full paper available in the Global Strategy Journal .
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Global Strategy Journal
Data/statistical analysis
Geopolitics and global strategy: Making money under anarchy
12-Jun-2026