Diplomacy and MNE strategy: how international relations can influence international business

Abstract

Purpose This study, a perspective piece, aims to argue that one particular slice of political institutional operations – the conduct of international relations – offers a clue to the possible risks that businesses face from geopolitics. Design/methodology/approach The authors examine the various facets of international relations and diplomacy, including the processes and arenas, to show the relevance of statecraft for firms looking to minimize political risk. Findings By understanding the role of diplomacy and statecraft as a process, firms can better prepare themselves for events that have far-reaching ramifications. This is very different than minimizing risk from inherent geopolitical tensions and allows for a more flexible approach to understanding risk levels in the global arena. Originality/value International business scholarship has focused on institutions and their effects on firms and has recently begun to re-examine the role of geopolitics and political risk on firm performance and decisions. However, the current literature continues to have a superficial understanding of institutional processes and their impact on business, especially when it comes to the daily workings of political institutions.