In “How do multinational enterprises respond to geopolitics? A review and research agenda”, a review article published in the International Journal of Management Reviews in 2026 (Volume 28, Issue 1), Stephanie Tonn Goulart Moura, Thomas C. Lawton, and Damian Tobin examine how multinational enterprises (MNEs) respond when geopolitical tensions affect relations between their home and host countries. Drawing on a systematic review of 93 research papers published between 1971 and 2023, the authors explain why firms facing similar geopolitical pressures often make different investment decisions. They argue that geopolitics is not simply an external source of risk. Its impact depends on interstate relations, commercial interests, firms’ political capabilities, and the flexibility of their investments.
The authors distinguish geopolitics from international political economy. While the latter examines the relationship between economic activity and international politics, geopolitics focuses on how geography shapes power and influence. For multinational enterprises, relations between home and host countries can be cooperative, conflictual, neutral, or ambivalent. These relationships may also change over time, making future developments difficult to predict. The authors illustrate this through the contrasting experiences of American companies such as Apple and NVIDIA, which have reduced investment in China amid shifting United States-China relations, and Germany’s Siemens, which has continued investing there. The same host country can therefore present different geopolitical risks to firms depending on their countries of origin.
The article examines how firms balance commercial interests against political pressures. Market opportunities, sunk costs, and competition influence investment decisions, but companies must also consider political resources, bargaining power, and the balance of interests. Geopolitical tension over Ukraine illustrates this problem: although Russia and Ukraine offered attractive conditions for agricultural businesses, the resulting turmoil made some investments increasingly difficult to sustain. The authors identify four strategic responses to geopolitical uncertainty: shaping engagement, through efforts to influence governments and political conditions; adaptive engagement, through changes to business operations; non-engagement, through suspending new investments and adopting a “wait and see” approach; and exit, through withdrawing from a market. The choice depends on firms’ political capabilities and their ability to modify or reverse investment decisions.
To explain these differences, Moura, Lawton, and Tobin combine real options theory with the political capabilities perspective. Real options theory emphasises retaining flexibility by delaying investments, committing resources in stages, or preserving the option to withdraw. Political capabilities concern firms’ ability to negotiate with governments, mobilise political resources, and manage competing interests. Firms with strong political capabilities and flexible investments may attempt to shape the political environment. Those with weaker capabilities may adapt their operations or postpone investment. Where investments are difficult to reverse and political influence is limited, withdrawal becomes more likely. The authors also note that political capabilities may lose their value when interstate relations change.
The review identifies gaps in existing research, particularly the lack of consistent ways to measure geopolitical risk and uncertainty. The authors call for greater attention to historical relationships between states, changes over time, and the characteristics of firms’ assets. They also highlight the need to examine how companies decide when to defer investments or leave markets.
The study is relevant to research on how geopolitical competition affects international business and foreign investment. For India-focused research, its framework could help examine how multinational enterprises navigate India’s relations with major powers, respond to sanctions and technology restrictions, and balance commercial interests against political pressures. Its main contribution is to explain why geopolitical tensions do not produce a uniform corporate response: firms’ decisions depend on their political relationships, commercial priorities, and capacity to adapt their investments to changing conditions.
