The COVID-19 pandemic has wrought devastating human suffering and major economic disruption. New work in the European Journal of International Management, has considered the impact on multinational enterprises (MNEs) and how in the post-pandemic world restructuring of global value chains is needed that may lead to a potential retreat from the globalization that we have seen in recent years.
Sarah McWilliam and Bo Bernhard Nielsen of the University of Sydney in Darlington, New South Wales, Australia, and Constantina Kottaridi of the University of Piraeus in Athens, Greece, reveal the consequences of the pandemic for MNEs and develop a new concept of the Liability of International Connectivity (LOIC). The team also show how the LOIC affects ownership, location, and internalisation advantages. They suggest that it might compromise control of supply, production, or distribution because of changes in global value chain (GVC) governance, the evolution of power asymmetries with nation states, and power asymmetries with suppliers.
Of course, MNEs that can adapt in the face of massive disruption may well thrive in the post-pandemic world. The team points out that new strategic directions that allow those companies to pursue optimal ownership, location and internalisation could lead to commercial advantages for them. However, the research suggests that the changes wrought by COVID-19 on MNEs will sit on a spectrum of adaptations where some companies need only make minimal changes to face the challenges and those at the other end of the spectrum will need to undergo major restructuring in governance and geography.
The researchers add that their findings suggest that there are many problems facing MNEs and how they can cope with the post-pandemic world and a perceived retreat from globalization. The major economic shakeup has also provided what might be couched positively for MNEs as new opportunities to improve their resilience through enhanced ownership advantages created from growth, diversification, digitalisation, automation, distributed production, and remote working.
McWilliam, S., Nielsen, B.B. and Kottaridi, B. ‘Global value chains and liability of international connectivity: MNE strategy post Covid-19’, European J. International Management.