U. of Illinois at Urbana-Champaign, Korea, Republic of
This study investigates the impact of the evolving international order, influenced by US-China rivalry, on the geographical resource reconfiguration of MNEs. Addressing a gap in the existing literature, which predominantly relies on anecdotal evidence, this research integrates theoretical concepts with robust empirical evidence. Employing a difference-in-differences approach, we examine how US MNEs adapt their resources through FDI in response to shifts in the rule-based international system, especially amid escalating US-China geopolitical tensions since 2018. A particular emphasis is placed on the high-tech sectors to evaluate industry-specific responses to national security concerns. The findings demonstrate a strategic adjustment in the resource commitments of US MNEs, by decreasing investments in China and augmenting them in G7 and EU member states. These shifts are more pronounced in high-tech industries, especially in terms of reduced engagements in China. The results indicate that MNEs are realigning their corporate value chains towards nations that are strategically aligned with their home country, with an increased focus on domestic operations for firms critical to national security. Our findings anticipate major transformations in international business practices and emphasize the role of dynamic capabilities in navigating a highly uncertain environment during the reshaping of the international order.
