Globalisation brings international economic opportunities for trade exports, capital flows, migration, and multinational business expansion. What happens, though, during periods of deglobalisation? It is often thought that this leads to a reversal – a contraction in international activity. Our research, recently published in the Journal of Management Studies, suggests that deglobalisation’s impact on multinational companies is more complex and can be a subtle, reiterative, and prolonged process, leading firms to pivot rather than contract their level of international engagement.  

Deglobalisation impacts 

Looking at the deglobalisation period between 1914 and 1979, we show – in the case of Australia – that multinationals neither returned home nor cancelled expansion plans. Instead, the number of multinationals and their investments continued to rise through this era. Macro-level foreign investment data indicates that deglobalisation did not curtail MNE activity. The number of new entrants grew from 144 in the first decade of the century to 565 by 1959. Significantly, the mode of entry for the majority of firms was through greenfield investment indicative of the commitment to expanding their overseas interests. This suggests that policies limiting trade and restricting capital movements – hallmarks of deglobalisation – do not necessarily deter MNEs from pursuing offshore opportunities. Australia continued to be a high income economy, with sustained growth in demand for goods and services used by consumers and other firms. We contend that deglobalisation policies and restrictions shifted the relative costs and benefits of the alternative modes for internationalisation, making foreign direct investment more attractive relative to alternatives such as trade. 

To substantiate these findings we do a deep dive into three foreign multinationals in Australia with different characteristics – such as country of origin, date of entry, and industry – to reveal more about the reasons behind corporate decisions and their resulting impacts. We find firms adapted by deepening their local engagement, drawing on local information sources and entrepreneurship, and by shifting some strategic control to the subsidiary. These adaptations extended across decades, as each MNE wrestled with knowledge gaps and organisational rigidities that reflected its administrative heritage. The findings highlight the capacity of enterprises to respond to changing circumstances and navigate the obstacles that may impede the implementation of such strategic shifts. The example of Dalgety’s highlights the benefits of a flexible response to knowledge barriers, which allowed subsidiaries to address localised issues that threatened the viability of the business. Contrariwise, the cases of ANZ and Ford point to the problems associated with maintaining central control and ignoring local experience and knowledge. 

Insights drawn from the cases 

We conclude that reactions to new deglobalisation conditions were often an extended process whose timing relied much upon the nature of the firm’s administrative heritage. Our findings highlight the way in which the legacy of past decisions affects the ability of firms to respond to new challenges. Specifically, the history of the firm determines its capacity to adapt. Particularly for multinationals, extensive international connections can impede the process of adjustment to changing global environments. The evidence from our cases offers insights from which we draw three testable propositions in relation to the challenges deglobalisation imposes upon MNEs, and how they respond: 

1. Deglobalisation pressures may emerge over an extended period, and multinationals will be both differentially affected and differentially aware of these effects. 

2. The speed and extent of a multinational’s adjustment to deglobalisation pressures will differ due to their varied administrative heritages of pre-existing governance choices. 

3. Deglobalisation will increase the relative importance of host market knowledge in some locations, triggering deeper embeddedness of MNEs in host locations and greater autonomy for subsidiaries. 

The value of historical research 

We adopt an historical methodology which enables us to observe and interpret the non-linear and contingent processes by which MNEs respond to new challenges over time. Specifically, a business history lens where firms’ actions can be observed over decades, enables a more nuanced and inter-temporal understanding of MNE experiences. Rich historical case studies play a vital role in understanding how MNEs react in an era of deglobalisation. Thus, we suggest that historical analysis might help direct us to foresee potential firm responses to the current and future incarnations of deglobalisation at a relatively early stage. In this respect, the function of corporate memory and the ability to track past policies and executive actions have an important role to play.