Strategic adaptation of Chinese multinational enterprises amid geopolitical tensions

Abstract

This thesis investigates how firms strategically respond to the challenges posed by geopolitical tensions through diversification strategies. Drawing on real options theory, my research examines how firms evaluate and pursue different types of diversification amid heightened geopolitical uncertainties, with particular focus on their product diversification and international diversification strategies.
In the quantitative section, I analyze diversification strategies as real options under geopolitical tensions. I propose that as geopolitical tensions rise, firms in affected industries adopt a dual approach: increasing product diversification while reducing international diversification. This strategic adaptation reflects firms' assessment of the relative flexibility and risk exposure associated with each diversification option. I further argue that non-market capabilities, specifically ESG engagement and political connections with home governments, enable firms to better realize real-option value of diversification amid geopolitical tensions, thereby moderating the relationships between geopolitical tensions and firms' diversification strategies. Based on a sample of U.S. sanctions imposed on targeted industries of Chinese high-tech firms from 2013 to 2022, this section finds empirical support for these hypotheses, demonstrating how firms strategically adjust their diversification portfolios when navigating geopolitical uncertainties.
The qualitative section explores the adaptation process through which firms interpret geopolitical tensions, evaluate strategic options, and implement diversification options over time. This complementary approach provides deeper insights into the temporal dimensions of strategic adaptation that quantitative methods alone cannot fully capture, clarifying how firms identify and respond to geopolitical tensions to achieve strategic transformation.
This thesis advances theoretical understanding of firm strategy under geopolitical tensions and contributes to international business literature by (1) extending diversification literature through distinguishing between product and international diversification strategies, revealing how firms strategically rebalance their portfolios by increasing product diversification while reducing international diversification during geopolitical tensions; (2) enriching real options theory by examining the risk-reward trade-offs and illuminating the strategic adaptation process that firms navigate under geopolitical uncertainty; and (3) expanding non-market strategy research by demonstrating how political connections and ESG engagement serve as critical moderators that enable firms to realize the option values embedded in diversification strategies during geopolitical tensions. These findings offer valuable insights for both scholars and practitioners on how firms can navigate the increasingly fragmented global business environment.

Date of Award	15 May 2026
Original language	English
Awarding Institution	University of Nottingham
Supervisor	Steven Zhou (Supervisor), Jingzi Zhou (Supervisor) & Jincai Dong (Supervisor)