Guest editorial: International business in times of global disruption

Citation

Earl, A. and Rose, E. (2022), "Guest editorial: International business in times of global disruption", Review of International Business and Strategy, Vol. 32 No. 1, pp. 1-9. https://doi.org/10.1108/RIBS-03-2022-164

Introduction

Global disruption has a significant impact on international business (IB) theory and practice. Some (although surprisingly few) studies have examined the 2007–2008 global financial crisis (GFC) and specific aspects of how it influenced international business (Aliouche, 2015; Cairns et al., 2009). For example, Rao-Nicholson and Salaber (2016) considered the impact of the GFC on banking systems, and Aliouche (2015) investigated post-crisis effects on country attractiveness. The role of the GFC has also been touched on in relation to emerging economies and their post-crisis development (Enderwick, 2009; Marinov and Marinova, 2012; Leavy, 2016). Despite its obvious importance in the increasingly volatile global environment, the issue of how organizations that operate across borders manage in the face of disruptive uncertainty has not been well covered in the international business literature. In particular, the existing literature has not yet engaged in developing a deep understanding of how global disruption affects the processes and strategies that are key to international business.

The current COVID-19 pandemic brings urgency to the notion of understanding how global disruptions affect the strategies associated with international business, but the issue is much more fundamental than the current crisis (Curran et al., 2021). There has been an increase in addressing grand challenges by IB scholars, who have emphasized how these challenges have changed how internationally active organizations adapt to uncertain and complex environments (Buckley et al., 2017; Doh et al., 2019). Global disruption, including the COVID-19 pandemic, certainly increases the complexity of the global environment, with respect to organizations’ domestic and international operations (Carracedo et al., 2021). The impact of COVID-19 has been studied in relation to macro issues such as international law and trade restrictions. International laws related to health and safety had to be adopted rapidly by the World Trade Organization (WTO) because human health has been compromised, which is in line with WTO incompatible policy measures (WTO, 2014). However, the grander issues related to national security questioned the way global disruption impacts the “exception” from WTO’s rules. The severity of COVID-19 on national security and human health has been compared to the dispute between Russia and Ukraine, which in both cases were emergencies and required immediate response (WTO, 2019).

Researchers have also responded to the call for understanding the role of global pandemic in IB strategy and institutional change (Ahlstrom et al., 2020; Hitt et al., 2021a). Institutional environment in the home and host markets has been significantly changed for multinational enterprises (MNEs), and these changes impact their operations (Aguilera and Grogaards, 2019; Hitt et al., 2020). This changes also impact the complexity of the institutional environment that firms have to learn how to operate in (Verbeke et al., 2021). COVID-19 implications for MNEs’ operations have been largely examined in relation to international trade policy (Curran et al., 2021); however, this implication needs to be embedded in deeper conceptualization of institutional theory to examine the interplay between home and host institutional environments and its impact on MNEs (Aguilera and Grogaards, 2019; Hitt et al., 2021b).

As a result of global pandemic, the governments were pushed to adapt their trade policies, which changed the landscape of business and put a lot of pressure on and disrupted global supply chains (GSC) and global value chain (GVC) (Sharma et al., 2020). Global disruptions such as GFC and COVID-19 have tested the adaptable capabilities of organizations in relation to becoming more technologically advanced (Sharma et al., 2020). Having technological skills and capabilities has become even more so important during the global pandemic because international trade has been disrupted with the supply and demand of goods and services (Gruszczynski, 2020). Hence, organizations’ responses to the global pandemic need to be able to deal with uncertain and continuously changing rules, regulations and socio-economic environment (Ahlstrom et al., 2020).

With this special session, we aimed to capture the empirical and conceptual development of the state of research on global pandemic and international business and strategy that firms – large and small – use to deal with global pandemic. We introduce three papers in this special issue on the role of global disruption in IB theory and practice. These papers investigate IB phenomena and generate new theoretical insights in the context of the strategies associated with IB in a rapidly changing environment.

Key research themes: global disruption and international business

International trade policy and international business

During the cause of COVID-19, policy changes were introduced rapidly because of the impact on human health and safety (WTO, 2014). Many governments temporary closed manufacturing facilities and some organizations had to close their operations voluntarily, due to shortage of labour supply and disruption in their supply chains (Gruszczynski, 2020). There has been a significant impact of COVID-19 on the international service sector, including air travel providers, international tourism operators and container shipping (WTO, 2020). Due to COVID-19, it is estimated that foreign direct investment will decrease between 5 and 15% globally (UNCTAD, 2020).

Many states introduced restrictions on exports, which WTO said would influence production and supply of food (Gruszczynski, 2020). This has sparked the debate that protectionism by individual states to protect their food production and supplies and well as medical supplies, can have a negative influence on international trade relations (Carracedo et al., 2021; Donthu and Gustafsson, 2020). In particular, restrictions and tariffs can influence organizations that operate in agriculture, traveling and health sectors because they still have to operate in different markets.

Emerging economies have particularly been characterized by the EEs’ governments’ ability to rapidly change policies and regulations (Earl and Michailova, 2021). MNEs from EEs have experienced institutional changes in early 1990s when they shifted to open market economies. This in fact made these MNEs to be better equipped to adapt to rapid institutional changes (Zubkovskaya and Michailova, 2014). However, if the trade relations become more fragile due to intensified tensions between states (e.g. USA–China and Ukraine–Russia), this can have significant implications on MNEs ability to adapt to institutional changes (Verbeke, 2020).

Institutional environment and organizations

Country institutional environment play an important role in the selection and implementation of international strategies. The state of institutional environment influences firms’ legitimacy (Earl and Michailova, 2021), firms’ resource profile and their willingness and capability to use risky strategies (Hitt et al., 2021b; Xu et al., 2020). Global disruptions, such as GFC and COVID-19, have influenced institutional environments due to sudden changes in international trade rules, which restricted the movement of labour across and within boarders.

Furthermore, COVID-19 has highlighted differences in the governments’ response strategies to the pandemic and the impact it has had on organizations (Hitt et al., 2021a). Governments with centralized government structures (e.g. China and Russia) can act quicker in changing policies and regulations related to pandemic. However, its efficiency depends on the effectiveness of centralized bureaucratic structure (Gambardella, 2020). Alternatively, less centralized, democratic government structures may take longer to respond but often use a more decentralized approach (Holmes et al., 2013). Centralized government structures are often adopted in emerging economies, where government has a lot of authoritative power in decision-making.

In addition, while IB research has emphasized the important role that the government plays in cross-border business (Boddewyn, 2016; Earl and Michailova, 2021; Wang et al., 2020), the strong involvement of states during disruption changes the dynamic relationships between countries, as well as between governments and MNEs, affecting the re-shaping of the international environment in the short, medium and long terms. Furthermore, it impacts the complexity of the institutional environment and international business (Verbeke et al., 2021).

The role that pandemic affected effectiveness of formal and informal institutions and their impact on organizations’ response to changing institutional environment. Typically formal institutions such as laws and regulations can be quickly changed by the governments (local, regional and/or central), which makes the institutional environment more unstable (Holmes et al., 2016). However, informal institutions such as norms and beliefs are generally take longer to amend (Helmke and Levitsky, 2004; Hitt et al., 2021a). When formal institutions are ineffective, they are often substituted or accommodated by informal institutions because they help to navigate uncertain institutional landscape (Earl and Michailova, 2021; Garrone et al., 2019). Hence, the interplay between formal and informal institutions is crucial to understand.

Strategic adaptation in organizations’ operations

There have been calls for IB scholars to address grand challenges (Buckley et al., 2017), which have changed how internationally active organizations adapt to uncertain and complex environments (Curran et al., 2021; Doh et al., 2019). Global disruption, including the current situation with the COVID-19 pandemic, certainly increases the complexity of the global environment, with respect to organizations’ domestic and international activities. Restrictions on trade and travel, institutional instability, economic disruption and political volatility have created global challenges for the transaction of international business, forcing firms to adapt (Hitt et al., 2020; WTO, 2019).

The relevance of disruption to change in cross-border operations has been studied, e.g. from a risk management perspective (Revilla and Sáenz, 2014), considering the organization of global supply chains (Revilla and Sáenz, 2017). Much of this literature pertains to the development and application of universal principles for managing overseas supply chains and operations during disruption (Sharma et al., 2020). However, there is an argument to be made that disruption is a product of change, which calls for a broader focus on the process of change as it applies to international activities in times of disruption (Verbeke, 2020).

Past and present global crises have re-shaped the world’s business, political and economic landscapes, with both commercial and social implications (Doh et al., 2019; Hitt et al., 2021b). Large and small firms had to re-think how they conduct business across borders. Since the beginning of the current pandemic, the tensions between the countries and institutions, have pushed supply chains – local and international, to strengthen their relationships to overcome these tensions (Verbeke, 2020). These tight supply chain networks are important for organizations to remain competitive. Furthermore, firms have refocused their location strategies to countries where governments handled the response to COVID-19 in an effective way (Hitt et al., 2021a; Westney, 2021). To maintain their competitive advantage, organization also have to engage in diversification of products and services, which should mitigate the risk that global pandemic has on their operations (Verbeke, 2020).

To operate during and post pandemic, organizations need to alter their capabilities fast (Helfat and Peteraf, 2015). Organizations and their managers need to be more resilient to deal with the challenges and the changes due to the pandemic. Integrating multiple and hybrid strategies may aid organizations to become more innovative in the way they deal with these challenges (Hitt et al., 2021a). Furthermore, the changes in formal and informal institutions due to pandemic, are done by key stakeholders, including governments (host and home) and global organizations such as WTO and World Bank. Hence, developing relationships with key stakeholders is crucial during and post pandemic to develop necessary capabilities to deal with uncertain and risky institutional environments (Ahlstrom et al., 2020; Verbeke et al., 2021).

Contributions to this special issue

In this special issue, we have invited scholars from different areas of management and international business to write papers on various aspects of the effects of the COVID-19 pandemic. In total, there are three articles in the special issue, which are summarized below.

First contribution is by Migdadi Yazan, is titled “Airline Effective Operations Strategy during COVID-19 Pandemic: Across Regional Worldwide Survey”. It empirically examines the effective operations strategies adopted by airlines to cope with pandemic outbreak. The study found the effective operational strategy patterns during outbreak of COVID-19 pandemic, which are three hybrid strategies, scheduling and capacity strategies. Two effective hybrid patterns were hybrid 1 and hybrid 2. The effective factors of these patterns were the number of employees, the number of destinations, the number of countries and international and regional orientation. However, the other effective patterns adopted different combination of the effective factors. Hybrid strategy 3 adopted the number of destinations, the number of continents, international/regional orientation and the load factor. Scheduling strategy pattern adopted the number of destinations and the number of continents, but the capacity strategy pattern adopted the load factor. The most effective strategy pattern before recovery according to change in the number of customers close to breakeven point is hybrid strategy pattern 2. The lowest effective pattern is the scheduling.

The paper contributes to the literature on organizational resilience. The findings suggest that airlines are more resilient if they use different patterns of hybrid strategies with the focus on factors such as length of the flights, employee numbers and number of countries or regions they operate in. Airlines that engage in longer international flights and have higher number of employees, as well as customers are more resilient in responding to the risks associated with pandemic. Airlines that engage in short haul flights with less number of employees and the number of customers that help them to be close to breakeven, enable airlines to be more resilient in their responses to the pandemic. The key factors that was crucial for all airlines’ response to the pandemic, is the changes that they introduce to their operations during pandemic.

Second contribution is by Davis Matthew, Lennerfors Thomas Taro and Tolstoy Daniel, titled “Can Blockchain-technology Fight Corruption in MNEs’ operations in Emerging Markets?”. The study provides conceptualization of under what conditions blockchain technology can have a sustained effect on fighting corrupt practices in emerging markets. The study provides an insightful insight into blockchain technology having mitigating effects on the rationalization, socialization and institutionalization of corruption. The study argues that blockchain technology effectively targets rationalization and socialization processes of corruption because of its automated and real-time manner of increasing transparency; however, blockchain technology can also help to de-institutionalize corruption only if the institutions on which these processes rest need to be deconstructed. These three processes happen at three levels: MNE-subsidiary relationship, MNEs-supply chain relationship and MNEs-government relationship. This makes it the deconstruction process even more challenging due to different institutional systems. Institutional environments have been changed significantly during the current pandemic and the reliance on informal institutions has become more prominent for organization. The authors argue that for the blockchains to have a positive influence on MNEs’ operations and mitigate corruption, the home institutional environment requires significant adaptation to support the blockchains technology.

Third contributions is by Gurkov Igor and Shchetinin Ivan, titled “Grappling for Strategic Agility during the Covid-19 Pandemic—The Case of the Russian Subsidiary of a Large Multinational IT Company”. This study explores through case study approach, the actions of the Russian subsidiary of a multinational IT company during the COVID-19 pandemic. These strategic and tactical actions aimed towards the exploration and exploitation of unexpected business opportunities as a result of COVID-19. These actions included the revision of pricing and payment policies, the redesign of operations, postponed the market launch of a new product which was not properly valued by local customers. As a result of those actions, the performance of the subsidiary improved significantly and strengthened relationships with local customers and business partners.

During implementation of these initiatives, the subsidiary encountered constant tensions with its corporate and regional headquarters, because these stakeholders did not consider the pandemic as a valid pretext for breaking the established rules for subsidiary operations and were opposed to changes in policies, practices and operations. Despite this, the subsidiary imposed changes, which influenced its corporate-wide initiatives. Managing these tensions was one of the success factors of this subsidiary. This has helped the subsidiary to achieve agility and increase strategic agility of the entire MNE during the uncertain environment in both home and host environments.

Some of the common themes emerged in the papers in this review is that institutional environment, whether host or home has become ever more uncertain for organizations to operate in. This supports the argument of Aguilera and Grogaards (2019) that the interplay between home and host environment requires more rigorous conceptualization and empirical investigation. Institutional environment always changes and both home and host countries’ institutional environments influence the way MNEs operate and perform (Earl and Michailova, 2021).

Another theme is the relationships with the key stakeholders are important in how organizations deal with uncertainty associated with global pandemic. The relationships with government have been emphasized because the governments have the ability to change formal institutions fast, which creates social, economic, political and technological uncertainly. Organizations have to manage their relationships with home and host governments to remain agile and resilient.

Furthermore, strengthening the supply chain networks is another theme that have been emphasized. Technological advancements can help with navigate uncertain institutional environment globally. Transparent and effective way of using technology can further help to influence corruption used by organizations and governments. However, that requires significant changes in legal and institutional systems of a country.

International business in times of global disruption: towards a research agenda

Global pandemic significantly changed the strategies and international activities of organizations. Table 1 presents a synthesis of the key research themes, the contributions of this special issue and provides future research avenues, as well as specific research questions.

Restrictions on global trade have significantly influenced international business (Carracedo et al., 2021). In particular such industries as international service sector, including air travel providers, international tourism operators and container shipping have been impacted significantly from the beginning of the pandemic (WTO, 2020). Organizations adapt their operations by using hybrid patterns based on the key factors that impact organizations response to the impact of the pandemic. Engagement in different strategic patterns helps airlines become more resilient, as well as their managers to become more resilient when managing employees during the turbulent times. There is a need to explore how the changes in international law and policies influenced specific activities of organizations. Furthermore, to understand how organizations operate and some succeed during COVID-19, future research could examine the way organizations navigate changes in international laws and home policy changes.

Institutional environment has been examined in great detail in general in IB literature in relations to institutional change, institutional complexity and organizational ability to cope with changing institutions (Aguilera and Grogaards, 2019; Hitt et al., 2020). However global pandemic has changed the dynamics of institutional environment in home and host markets due to tensions of different stakeholders. The way organizations deal with these tensions has not been explored, but it is an important avenue for future research because relationships between different stakeholders influenced the way organizations operate in uncertain and volatile institutional environments.

Furthermore, strategic adaptations of organizations and the ways they operate internationally requires further examinations. Organizations use technology to adapt to rapidly changing world, as well as rely on established supply chains to remain competitive (Revilla and Sáenz, 2014, 2017; Sharma et al., 2020). However, we further need to understand whether organizations are ready or not to become technologically advanced. Much research emphasizes the dark side of the pandemic on international activities of organizations. Gurkov and Shchetinin (2021) in this special issue demonstrate that pandemic can present opportunities for organizations, that they need to capitalize on despite tensions it may create. There is a further need to understand how organizations capitalize on the opportunities that pandemic may create.

Table 1.

International business in times of global disruption: special issues contributions and future research agenda

Implications of global distractions to IB	Special issue’ contributions	Future research agenda	Specific research questions
International trade policy and IB: The changes in international trade policy (e.g. trade restrictions, tariffs) had significantly influenced the ability of organizations to engage in international trade. The tensions between countries	Restrictions influenced organizations, particularly airline industry to operate during COVID-19. Airlines use hybrid strategies based on the key factors that influence their responses to become more resilient	Understanding the ambiguity of policy change can help to understand how these changes impact specific cross-border activities	To what extent the changes in policy affected different industries? How do organizations manage the changes in international trade, as well as the policy changes in their home environments?
Institutional environment and organizations: Institutional environment has changed due to pandemic. Pandemic emphasized the fact that governments have power to change formal institutions fast to protect their states. Informal institutions take longer to change, which may influence	Pandemic has impacted the way organizations operate in home and foreign markets. Institutional environments have changed significantly due to changes in laws and regulations. The use of informal institutions to deal with fast changing policies and regulations	There is a need for deeper examination of interplay between the changes in the home and host countries institutional environment during the pandemic and the way these changes impact organizations cross-border operations	How has global pandemic influenced the relationship between organizations and the home government? How has global pandemic influenced the relationship between organizations and the host government? How has the interplay between formal and informal institutions influenced the changing institutional landscape during the pandemic?
Strategic adaptation: Organizations focus on building strong supply chains and developing relationships with key stakeholders to remain competitive	Technological advancements through blockchain technology can help organizations to seize opportunities presented by the global pandemic	There is a need to understand how organizations adapt to the need to be more technologically advanced. Furthermore, there is a need to understand how organizations capitalize on the opportunities that global pandemic presents	How do organizations use the risks presented by global pandemic to their advantages? How do organizations capitalize on the opportunities presented by global pandemic? What specific strategies organizations use to successfully operate in home and host markets?