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Managing Technological, Sociopolitical, and Institutional Change in the New Normal

February 2020
Journal of Management Studies 57(3)

February 2020
57(3)

DOI:10.1111/joms.12569

Authors:

David Ahlstrom

Hong Kong Metropolitan University

Jean-Luc Arregle

emlyon business school

Michael A Hitt

Texas A&M University

Gongming Qian

Southern University of Science and Technology

Show all 6 authorsHide

A New Normal environment for business has emerged in the years after the 2008 financial crisis based on changes in economic, technological, demographic and sociopolitical factors. This combination of changes has created a New Normal environment for firms around the world with major implications for managers, strategists, and entrepreneurs alike. It has resulted in an environment with new challenges and opportunities that are considerably different from what firms had to contend with in the years previous. In this paper, we present these main changes that characterize the current New Normal business environment and highlight some key implications for strategy and management. Then, we present the nine articles in this special issue dealing with different dimensions of this new environment for firms. Subsequently, we outline some future research questions that could help to advance our knowledge of the New Normal environment and its implications for firms and management theories. In examining the New Normal, it is important to be reminded that the world is indeed round and even small actions on one side of the globe can have a major impact on organizations on the other side of the globe.

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Managing Technological, Sociopolitical, and

Institutional Change in the New Normal

David Ahlstroma, Jean-Luc Arregleb, Michael A. Hittc,

Gongming Qiand, Xufei Mae and Dries Faemsf

aThe Chinese University of Hong Kong; bEM Lyon Business School; cTexas A&M University; dSouthern

University of Science and Technology; eCity University of Hong Kong; fWHU Otto Beisheim School of

Management

ABSTRACT A New Normal environment for business has emerged in the years after the 2008

financial crisis based on numerous changes in the world's economic, technological, demo-

graphic, and sociopolitical factors. This combination of changes has created a New Normal

environment for firms with major implications for managers, strategists, and entrepreneurs alike.

It has resulted in an environment with new challenges and opportunities that are considerably

different from what firms had to contend with in the years previous. In this paper, we present the

main changes that characterize the current New Normal business environment and highlight

some key implications for strategy and management. Then, we present the nine articles in this

special issue dealing with different dimensions of this new environment for firms. Subsequently,

we outline some future research questions that could help to advance our knowledge of the New

Normal environment and its implications for firms and management theories. In examining

the New Normal, it is important to be reminded that the world is indeed round and even small

actions on one side of the globe can have a major impact on organizations on the other side of

the globe.

Keywords: communication technology, innovation, institutions, new normal, nonergodic

change, small events, state intervention

INTRODUCTION

More than two decades ago, Hitt and colleagues (Hitt et al., 1998) introduced the idea of

the new competitive landscape to describe the more turbulent business environment that

was emerging from the increased globalization and growth of that period (Friedman,

Journal of Management Studies 57:3 May 2020

doi:10 .1111/jom s .125 6 9

Address for reprints: David Ahlstrom, CUHK Business School, The Chinese University of Hong Kong, Cheng

Yu Tung Bldg., 8/F, Shatin, NT, Hong Kong (ahlstrom@baf.cuhk.edu.hk).

412 D. Ahlstrom et al.

1999). This new environment was characterized by more turbulent conditions in which

competitors could enter markets unexpectedly, assisted by increasingly open markets and

new supply chain techniques that facilitated market entry and cost arbitrage, even for

smaller and emerging economy firms (Cavusgil and Knight, 2015). Cross-border eco-

nomic activities such as trade and foreign direct investment (FDI) enabled by advances in

supply chain and communications technology were on the rise, leading some authors to

envision a future with increasing economic, financial, knowledge, and political similar-

ities across countries as characterized by the ‘world is flat’ hypothesis (Friedman, 2007).

The heady optimism of the day was likewise heralded by Fukuyama’s (1992) popular

‘end of history’ thesis that observed the ascendancy of Western liberal democracy and

governance that would promote more inclusive institutions, increasingly free markets,

and private enterprise as a world norm (Acemoglu and Robinson, 2012). Russia seemed

to be on that path in privatizing its economy and China’s private sector was thought to be

helping the economy there to grow out of the old state-dominated plan (Hitt et al., 2004;

Naughton, 1996). This viewpoint was further articulated in the Washington Consensus

employed by the World Bank and others in advising developing countries to improve

their institutions, intellectual property rights, and establish freer markets (Stiglitz, 2002).

The ‘flat’ hypothesis even went so far as to predict that local governments could be-

come irrelevant given the rising global trade and investment, increases in multinational

enterprises (MNEs) and cross border movement, and the growing numbers of new in-

vestors (often in developing economies) demanding that firms and governments deliver

improved performances and investment returns (Friedman, 2007).

Then, the 2008 financial crisis occurred, challenging this vision of the world economy

(El-Erian, 2010). Major technological and institutional changes along with geopolitical

upheaval in several parts of the world has again been leading to a major shift in the busi-

ness environment. From the worldwide financial crisis of 2008 and the ensuing Great

Recession, coupled with renewed populist movements and enabling technologies, par-

ticularly in communications and artificial intelligence (AI), a new business landscape for

firms has again been emerging (Cukier, 2019; Etzioni, 2015). These nonergodic changes

– changes that are nonlinear, erratic, and hard to predict as they do not look much like

the recent past – are yielding some unexpected outcomes and boundary conditions for

the current business and economic environment (El-Erian, 2010; Hitt et al., 2016). For

example, after the 2008 crisis, capital flows between countries, which had been rising

since the end of the Second World War, retreated significantly to levels not seen for a

quarter century (Sharma, 2016). The growth in trade also slowed to a crawl (Lund and

Tyson, 2018). Another somewhat unexpected change has been the deglobalization of

some markets thereby pulling back from the increases in globalization and trade of the

1990s and early 2000s, while other markets still retain some degrees of globalization,

more in the expanding emerging economies (Lund and Tyson, 2018; Peng et al., 2017;

Rodrik, 2018; Zhu et al., 2020).

Additional risks created by politics and government actions, previously relegated to a

relatively minor concern in international business, are front and centre, and amplified by

new computer and communications technologies (Fortune, 2018; International Monetary

Fund, 2018; Witt, 2019). Likewise criminal activity against individuals, firms, and even

governments has been increasing, also enabled by new computing and communications

New Normal Business Environment 413

technology. Small events such as a protest or an flu outbreak in a far corner of the

globe can suddenly wreak havoc on a firm’s operations seemingly far removed from the

difficulties.

The seismic changes in the early years of this century led Mohamed El-Erian in

his well-known Per Jacobsson lecture in 2010 entitled ‘Navigating the New Normal in

Industrial Countries’, to state: ‘Our use of the term [New Normal] was an attempt to

move the discussion beyond the notion that the [recent financial] crisis was a mere flesh

wound… instead the crisis cut to the bone. It was the inevitable result of an extraordi-

nary, multiyear period which was anything but normal’. Not only the financial upheaval

El-Erian discussed, but other important nonergodic changes occurred concurrently, cre-

ating highly challenging and novel conditions. Some of these started before 2008 but be-

came more relevant or came to fruition in the New Normal environment (Cukier, 2019;

Lund and Tyson, 2018; Rodrik, 2018). These include technological changes that are

expanding industry boundaries and enabling greater competition and coopetition, in-

creases in nonrival goods that can be easily shared and are more characterized by disrup-

tive innovation and increasing returns (Ahlstrom, 2010; Jones, 2019; Romer, 1990, 2014).

In addition, monitoring technologies and communications have advanced rapidly, facili-

tating entry into remote markets, but also enabling government oversight of firms and in-

dividuals, as well as facilitating increased criminal activity against firms and governments

(Van Assche, 2019; Cukier, 2019; Hitt et al., 2010). Firms experience these changes as

they face increased foreign competition in domestic markets (Peng et al., 2019). Firms

must also deal with significant sociopolitical changes such as the Arab Spring and related

powerful social movements that are increasingly part of the New Normal environment

around the world (Etzioni, 2015; Tilly, 2004; Witt, 2019).

These changes rival those in scope to those that were experienced with the new com-

petitive landscape that emerged in the ‘flatter’ world of the 1990s and have created a

New Normal for strategy, international business, and innovation and entrepreneurship.

The slow recovery experienced in the years after the 2008 financial crisis is unlikely to

recreate that previous landscape. The financial shock, coupled with other technological,

demographic and societal changes, reached a tipping point that moved the international

business environment down a path with new enduring competitive and institutional char-

acteristics, including some critical institutional voids that firms have to address (Webb et

al., 2019). For researchers, two key aspects characterize this New Normal environment:

Firms have experienced some radical changes in both their competitive and institutional

environments and also, these changes have necessitated major shifts in firms’ behaviours

(Verbeke, 2018). In all of this, it is important to remember that the world is indeed round,

and actions and events on one side of the globe such as new government regulations and

intrusions into business, local protests or the emergence of a new influenza strain can

result in major challenges for firms on the other side of the globe, and rather quickly.

The competitive landscape has taken some unexpected twists and turns in such respects

in recent years leading to the notion of the ‘New Normal’ environment for business and

many ensuing challenges.

Thus the core objective of this special issue on ‘Strategy, innovation, and new ventures

in the New Normal global business landscape’ was to bring together current research

that illuminates the challenges and opportunities alike that firms can experience in this

414 D. Ahlstrom et al.

New Normal environment. In this paper, we first provide a more in-depth discussion

of some core characteristics and challenges of the New Normal. Subsequently, we pro-

vide an overview of the core insights from the nine papers of this special issue. Finally,

we discuss interesting avenues for future research that can help us to further increase

our theoretical and managerial understanding of the New Normal phenomenon and its

implications for firms.

FACETS OF THE NEW NORMAL

There are several main facets of the New Normal environment discussed here and ad-

dressed in the papers of the special issue. The main components, and their relationships,

include economic, demographic, socio-political, and technological components as sum-

marized in Table I.

Economic and Demographic Components of the New Normal

The restructuring of the economic order has particularly affected multinational enter-

prises (MNEs), and others doing business across borders. After the 2008 financial crisis,

capital flows between countries and trade in goods and services retreated significantly

(Sharma, 2016). Foreign direct investment declined from its pre-crisis high of more than

$3 trillion to around $2 trillion in 2015 (The World Bank, 2017). Some have further ar-

gued that the more developed economies could linger in a low-level growth equilibrium

for a prolonged period slowing down trade as well (El-Erian, 2016; Lund and Tyson,

2018). High debts caused in part by heavy reliance on accommodating monetary poli-

cies, driven by central banks and governments, has likely contributed to the low-growth

equilibrium often accompanied by large budget deficits and low interest rates. Still,

despite the unconventional ‘new monetary’ policy, central banks seem less effective at

moderating financial volatility and at promoting growth (Levaux, 2017). Many devel-

oped countries could face problems similar to that of Japan’s economy of recent years,

which has been stuck in a deflationary trend and problematic demographics, despite

years of accommodating policies trying to solve these problems as exemplified by Japan’s

‘Abenomics’.

Moreover, while variation exists across countries and time, a clear trend of slower

growth among developed economies has been demonstrated from recent studies on out-

put and productivity growth (Anzoategui et al., 2019). This trend began before the global

financial crisis but may have become more pronounced since 2008 (Dabla-Norris et al.,

2015). The prospects for boosting slow growth in advanced economies via increasing fac-

tor accumulation may be limited, notably for demographic factors and short to medium

term drags on the demand and research and development so important to productivity

and growth (Ahlstrom, 2010; Anzoategui et al., 2019; Dabla-Norris et al., 2015).

The shocks created by the 2008 financial crisis combined with other long-term changes

that materialized in the last decade changed the environment to what is being called the

New Normal (Etzioni, 2015). These changes also include demographic factors in devel-

oped countries such as Japan including an aging population, fertility rates below replace-

ment rates, and declining population growth rates, all of which undermine economic

New Normal Business Environment 415

growth (Gagnon et al., 2016). Recent estimates for the USA suggest that average annual

GDP growth will also continue to run more slowly than the average growth rate after the

Second World War (Fernald and Li, 2019). A few studies even claim that the historical

economic performance in developed countries over the past 60 years was supported by

abnormal demographic conditions such as an extraordinary growth in the working-age

population with a modest roster of senior citizens (e.g., Arnott and Chaves, 2013). Such

Table I. Major facets of the new normal

Dimensions Main changes

Economic Decrease in foreign direct investment (from its pre-crisis high of over $3 trillion to around

$2 trillion in 2015)

Developed economies linger in a low-level growth equilibrium for an unusually prolonged

period

Heavy reliance on accommodating monetary policy, driven by central banks and govern-

ments, accompanied by budget deficits and low interest rates

Output and productivity growths in advanced economies had been slowing down and

this trend should not dramatically change

Growing economic inequality within countries and between generations

China is trying to achieve a slower but more sustainable economic development

Brazil, India and Russia, have a more limited growth rate due to economic and demo-

graphic transition, and structural deficits

Slower paces of growth in developed countries and in some emerging countries

Demographic In developed countries: aging baby boomers generation, fertility rates below replacement

rates, and declining population growth rates

Same issues in older emerging economies (China and Russia) in the near future

Strong demographic growth in some emerging countries (e.g., in Africa)

Technological Cybernated data: Information is digitized, stored, processed, and formatted for mass

distribution

Privacy merchants and privacy violating triangulation

Growing threat to privacy from governments and private profit-making corporations

New computing, communications, AI, and design and manufacturing (e.g., 3D printing)

Increased disruptive innovation and nonrivalous goods facilitated by new technologies

Political Use of cybernated data for political manipulation

New populist movements emerging based on inexpensive communications technology

Increased governmental participation in firm management and trade

National security

Renewed nationalist movements

Social Questions about the legitimacy of free markets, international trade, or for-profit

organizations

Increase of the ‘sustainability’ issue

Intergenerational conflicts especially in developed countries

Pervasive but fragmented social networks

416 D. Ahlstrom et al.

demographic ‘tail’ winds, supporting economic growth, may have started to change to

‘head’ winds in developed countries. Moreover, we are likely to start observing simi-

lar trends in older developing economies (China and Russia), and later in the younger

emerging economies such as Brazil and India within the next 20–30 years. Hence, the

New Normal era could be viewed as a return to a more normal demographic period in

developed countries, but also one that is creating significant challenges and changes for

firms.

A slower pace of growth in developed countries in turn leads to slower growth in the

average wages and living standards for workers. For firms, they mean relatively mod-

est growth in sales in these markets (Fernald, 2016) even for foreign competitors from

emerging economies and fiercer competition within these markets. Even in China, the

government has tried to rebalance its economy to achieve a slower but more sustain-

able economic development due to several challenges including environmental prob-

lems, high debt to GDP, demographic changes, and income inequality (Zhang and Chen,

2017). Brazil, India and Russia have similarly experienced a period of economic and

demographic transition. Together with structural deficits, this has created a situation

whereby growth rates in the developed or larger economies of the world are smaller in

the New Normal environment than before 2008.

Socio-Political Components of the New Normal

In many countries, the citizens are dissatisfied with the general course of their countries’

economies, as well as with their political institutions. There is a ‘great disconnect’ (Etzioni,

2015) between political institutions, even democratic ones, and a country’s citizens. This

is due to the fact that voters can perhaps be more easily misled because news items have

become less informative or even inaccurate. Media and social networks have also become

fragmented, which allows people to choose their sources for information and information

may not be as well vetted as in the past (Spohr, 2017). In this way, they can live a sort of

informational and social groupthink, seldom hearing counterarguments or objections to

their beliefs and assumptions (Cavanagh, 2019). Voters can be philosophically conser-

vative (progressive) but can have operational or social preferences which are progressive

(conservative) (i.e., the ‘split-self ’ hypothesis). This ‘lack of information, media biases,

interest group power, and the voters’ ‘split selves’ may each account for some of the dis-

connect’ (Etzioni, 2015, p. 182). The previous economic and demographic factors can

also explain such disconnects as governments struggle to restart the economic growth

that their citizens had experienced for decades before 2008.

Increased participation of the state with the private sector also characterizes the New

Normal environment. Firms doing business in a given foreign host country are often

compelled to cooperate with local state regulations, security agencies, and major state en-

terprises, sometimes in areas with which they may disagree, and which may also conflict

with their home country laws such as censorship, information privacy, and state security

regulations. Failing this, the company may face sanction, legal action, or expulsion from

the country as happened with Google in China in 2010. This approach links national

security to commercial activity and the health of state-linked enterprises thereby influenc-

ing the strategic choices of the foreign firm competing in that market (Bruton et al., 2015).

New Normal Business Environment 417

The dispute that arose between the National Basketball Association (NBA) and China

over a team executive’s brief tweet on the 2019 Hong Kong protests illustrates this prob-

lem. China perceived that its territorial integrity was interfered with by those commenting

positively on the Hong Kong protesters, even a single basketball team executive in a far

off US city. In response, China cancelled a major basketball tournament, reduced NBA

broadcasts in China and some major sponsorships for the NBA in China were cancelled.

One response to this type of problem has been for home country companies to move their

manufacturing capacity away from banned host countries (Hufford and Tita, 2020; Woo

and Volz, 2019), though firms have learned that being based outside of a country does

not mean that they will be safe from sanctions. These sanctions can range from the firm

being pushed out from the country as happened to Google in China several years ago, to

lawsuits or even legal action directly against company executives for perceived infractions

against the host country’s leaders or national security (Cardenal et al., 2017).

State security issues are not limited to countries with larger state commercial links. The

dispute between the U.S. Federal Bureau of Investigation and Apple in 2016 demonstrates

the potential conflict between commercial and national security interests. Arguments

popular around the turn of the current century for the inexorable progress of global-

ization as popularized by Friedman (2007) and others, pronounced the irrelevance of

local governments in the face of global corporations and international trade and travel.

It was argued that national sovereignty was a 19th-century concept made irrelevant by

two world wars and globalization. But this has not been the case under the current New

Normal environment. Apart from the NBA example, this was further exemplified by the

recent forced departure of two top managers (chairman and CEO) from Cathay Pacific

Airways for their support of their employees’ rights to free expression related to the 2019

Hong Kong protests. This stance angered Mainland China and Cathay was going to

be restricted from flying over most Chinese airspace before the crisis was defused (Lee,

2019). Cathay Pacific is not a Chinese company; it is owned by the Swire Group from

the UK. The notion that the top executives of a foreign firm can be forced to resign for

adhering to internal and internationally recognized standards of conduct is a clear indi-

cation that local government is not irrelevant as once pronounced at the beginning of the

twenty-first century. The recent upsurge of politics and governments’ actions, shaping

firms’ attention and influencing their strategic options (Fortune, 2018; Witt, 2019), shows

that we need to better understand these issues that have become increasingly relevant in

the New Normal environment.

Technological Components of the New Normal

Major technological changes have also played a key role in this New Normal. They

have made information digitized, stored, processed, and formatted for ease of analysis

and mass distribution, that is into ‘cybernated’ data as named by Etzioni (2015). Etzioni

(2015, p. 106) points out that cybernated data represent a serious and growing threat

to privacy in two different ways: ‘A discrete piece of personal information, collected

at one point in time, called “spot information”, may be used for some purpose other

than that for which it was originally deemed constitutional, or it may be pieced together

with other data to generate new information about the person’s most inner and intimate

418 D. Ahlstrom et al.

life’. Maintaining privacy in the New Normal cyber age protected from government

and other organizations and individuals is increasingly challenging due to cybernation.

While this dimension is increasing in importance, legal theory and practice have not

maintained pace with the technological change (Etzioni, 2018). What is new in terms of

cybernated data is that significant violations happen not because of collating, storing, an-

alysing, and distributing information, but because of combining such information with

other information, a process that can be completely legal on its face but can prove harm-

ful in malicious hands. Combining information frequently provides a comprehensive

profile of one’s personal life. Therefore, ‘the most serious violations of privacy are often

perpetuated not by surveillance or information collection per se, but by combination,

manipulation, and data sharing – by cybernation’ (Etzioni, 2015, p. 118). As a result,

a characteristic of the New Normal is that a growing threat to privacy comes not only

from governments but also from private firms, the so-called privacy merchants. They sell

(often private) information to whomever pays the price. They use a process of ‘privacy

violating triangulation’, to derive much about a person’s protected private information

(e.g., medical, financial) by identifying and integrating ‘innocent’ facts or information

not protected by law. Governments continue to seek a good balance between the new

information technology and AI, and privacy concerns (Etzioni, 2018).

However, cybernation and other technological developments such as AI may also pro-

vide additional opportunities for firms (Cukier, 2019; Frey, 2019) and increased flexibility

for workers (Sundararajan, 2016). Revolutionary improvements in technological perfor-

mance lead to improved productivity and standards of living (McCloskey, 2016; Nordhaus,

1997). But technological change does not always have to imply high-end improvements on

established technologies and products. Improvements at the lower end of a technology’s

performance trajectory can also have a positive impact on markets and individual stan-

dards of living (Tomizawa et al., 2020). Such disruptive innovation has facilitated not only

competitive capabilities but also the creation of new product-markets providing cheaper

and simpler applications to the lower end of the market (Christensen et al., 2018). For

instance, smaller firms have entered the pharmaceutical industry producing generic drugs

and functionally equivalent healthcare products that are especially helpful for base of pyr-

amid customers and more remote applications such as home healthcare (Ahlstrom, 2010).

Similarly, wireless communication, initially of a poor quality, was able to slowly disrupt

superior landlines, partly due to wireless’s mobile capabilities, while enabling a host of

new applications, many for lower end customers (Christensen and Raynor, 2013). Major

new markets have also emerged allowing some young firms in the New Normal to achieve

billion-dollar valuations early and a few to become Fortune 500 firms in a few short years.

Technological change has also created a New Normal for competition as new com-

puting communications, AI, and design and manufacturing such as 3D printing have

afforded (often smaller) firms the capabilities to enter markets that would have been

closed to them in the past due to scale or sophistication required for research, design or

access to markets. Small firms can sell online and even abroad and with greatly enhanced

‘storefronts’. Revolutionary advances in computing, communications and software have

considerably opened up competition, with positive outcomes as well as negative external-

ities. Thousands of retail stores including whole chains have closed in recent times due to

significant competition from online retailers. Manufacturers face major challenges from

New Normal Business Environment 419

smaller firms that are taking advantage of new materials, design houses and 3D printing

and supply chain techniques to explore businesses in a variety of domains (such as spe-

cialty design, components and parts).

Disruptive innovations have also created new security concerns. For example, mobile

phones, home automation systems (Hu, 2018), and even automobiles are vulnerable to

hacking, allowing control by maleficent individuals. State actors are increasingly spon-

soring many of these intrusions, costing consumers and firms billions of dollars annually

(Martin and Dou, 2019). Such activities are widespread and represent crime but also can

become somewhat of a technological arms race (Volz and Youssef, 2019). Security spe-

cialists in telecommunications worry about backdoors in transceiver equipment that can

be used to capture data and eavesdrop on conversations and emails (O’Keeffe and Volz,

2019). Moreover, governments have been increasingly concerned with the national se-

curity risks embedded in the data communications and telecommunications grids, which

are key to the function of modern economies (Otuoze et al., 2018). The response of

governments, such as the US (Klein, 2018), the UK (Keane, 2018), and other developed

countries has been to ban the use of technology in national infrastructure from compa-

nies domiciled in countries with laws that compel firms to share data with their security

agencies and to increase surveillance. The European Union is contemplating, but has not

yet decided, to enact similar restrictions (Drozdiak, 2020). These bans affect the growth

opportunities of host country companies and their home country counterparts as well as

trade and investment (O’Keeffe et al., 2019).

A CENTRAL STRATEGIC CHALLENGE IN THE NEW NORMAL:

GLOBALIZATION AND DE-GLOBALIZATION

The New Normal challenges how businesses are organized, governed, and manage their

interface with a range of stakeholders (Etzioni, 2018; Young et al., 2008). New technol-

ogies and techniques, while providing much opportunity also raise concerns for firms

with respect to their position in previously difficult-to-contest markets (Christensen et al.,

2018; Davis, 2016). One important managerial and strategic challenge for international

firms encapsulates most of the components of the New Normal environment presented

in the previous section: navigating the globalization-de-globalization tension (Witt, 2019).

Resulting from the aforementioned facets of the New Normal, the co-existence of

globalization and de-globalization has become a distinct and important reality for firms

on the international stage. Globalization is a process leading to greater interdependence

among countries or their citizens (Guillén, 2001), while de-globalization represents the

process of weakening interdependence (Witt, 2019). Depending on their context and

characteristics, firms have to deal with the paradox resulting from the coexistence of

these two opposing forces in the New Normal environment.

Globalization

Globalization in the New Normal environment will continue to drive many strategic de-

cisions, especially those related to emerging economies (Wright et al, 2005; Young et al.,

2014). This is because of economic liberalization in a number of the world’s emerging

420 D. Ahlstrom et al.

economies (Hoskisson et al., 2000), such as China and India, has led to rising demand,

globalized production, and increased buying power of the populations (McCloskey,

2017). However, multinational firms need to address the challenges that have arisen in

the New Normal environment, which relate to entry-related, exit-related, as well as re-

gion-related strategies.

First, the New Normal context significantly shapes foreign market entry strategies.

Prior research shows that firms in regulated industries tend to avoid investing in countries

with high levels of macroeconomic uncertainty (Garcia-Canal and Guillen, 2008), and

prefer local partners having strong connections with policy makers in emerging markets

(Lu and Ma, 2008). However, the New Normal has seen the regulation focus of some

host countries shifted from industries, such as utilities and infrastructures, to technologies

and the natural environment. For example, in recent years, low-tech, less environmen-

tally-friendly industries have become less desirable for many host countries, while indus-

tries using high-tech and clean-energy are increasingly preferred (Delios and Ma, 2010).

Given these changes, multinational firms need to update their entry-related strategic

decisions such as the drivers, mode, timing, location, and partners (Luo et al., 2019), by

considering numerous factors at the corporate, country, subnational, and industry levels

(Ma et al., 2013).

Second, multinational firms should also take the New Normal context into consider-

ation when designing and implementing exit strategies. In international business, exit

strategy often refers to divestment (Benito, 2005), or closure/sell-off of units in foreign

locations (Mata and Portugal, 2000). There are two types of exit strategies: forced exit

as a result of nationalization actions in host countries (e.g., Kobrin, 1980), and voluntary

exit (Benito, 2005), which has been the focus of recent international business research

and also relevant to the New Normal context. In particular, given the increase in the

cost of doing business in some formerly ‘hot’ host countries such as China, multina-

tional firms may consider exit as a strategic response. This is similar to what happened

to the increasing cost disadvantages of advanced economies like Belgium (Pennings and

Sleuwaegen, 2000) and Japan (Yamamura et al., 2003) decades ago. Moreover, the New

Normal environment may also produce an increasing number of exits by foreign firms

due to political and institutional transformation in transition economies such as Poland

(Roberts and Thompson, 2003). By nature, exit strategy is a strategic choice named by

Oliver (1991) as ‘avoidance’.

Third, multinational firms need to reconsider their regional foci in the New Normal

environment. Prior research has shown the disproportionate importance of multina-

tional firms’ home regions (Rugman and Verbeke, 2004). As the liability of inter-regional

foreignness (Rugman and Verbeke, 2007) might be heightened in the New Normal en-

vironment, companies with strategies emphasizing economies of scale with a broader

multinational spread may need to shift toward intra-regional diversification (Qian et al.,

2008; 2010). With regard to multinational firms’ regional structures, extant research high-

lights the strategic roles of regional headquarters such as corporate ambassador, regional

administrator, and learning centre (Enright, 2005; Ma et al., 2013). In the New Normal

environment, multinational firms may use their regional headquarters, which are locally

embedded in a region, to shape the global headquarters’ understanding of the local

environment under conditions of uncertainty or to better respond to the legitimacy and

New Normal Business Environment 421

other requirements of the local stakeholders (Ahlstrom and Bruton, 2001; Birkinshaw

et al., 2008).

De-globalization

De-globalization has become a reality and is expected to persist in many markets (Rodrik,

2019; Witt, 2019) in the New Normal environment. Research has suggested that global-

ization is expected to change like a pendulum, a cyclical phenomenon dependent on a

specific junction of political-economic conditions (Meyer, 2017). After reviewing multi-

nationals and global capitalism from the nineteenth century to the twenty-first century,

Jones described the image of a world economy as ‘waves of globalization’. That said,

we are witnessing a return to a more deglobalized era (Kobrin, 2017). That is, we see

iterative cycles, shifting from globalization to deglobalization and perhaps back again.

In a way, however, the New Normal is actually characterized more by a co-existence of

globalization and deglobalization, as trade flattens out and cross border investment de-

clines, but cross border cyber activity increases along with increases in born global firms

and cross border merger activity, especially originating in emerging economies (Cavusgil

and Knight, 2015; Lund and Tyson, 2018; Zhu et al., 2020).

On the one hand, recent years have seen the increase of national governments’ pro-

tective measures, including both tariff and non-tariff barriers (Meyer, 2017). These

governments use exchange controls and other restrictions to address security concerns,

competition concerns, and issues related to the protection of key assets and innovations.

Such anti-globalization policies may restrict the international transfer of intellectual

property (Conti, 2018), the movement of labour, the integration of markets for goods

and services, and the flow of foreign capital. On the other hand, the anti-globalization

movement has gone beyond government policies. In many developed countries, opti-

mistic and positive feelings about a ‘Global World’ have been offset by more negative

ones, as illustrated by Britain’s Brexit movement, blaming globalization and unrooted

corporate structures for existing economic or societal problems (Kennelly, 2001; Rodrik,

2019). Moreover, nationalist and populist parties have gained support in many countries

to propose their ideas and rhetoric, which are based primarily on increasing controls on

immigration and exercising more control over local institutions which are supportive of

local populations (Kobrin, 2017; Rodrik, 2018).

As MNEs’ strategies have been built on an implicit assumption of ongoing globaliza-

tion (Witt, 2019), significant dimensions of their strategic responses to de-globalization

pressures will be qualitatively different from when operating under the premise of glo-

balization. In particular, because of the scepticism towards globalization, MNEs likely

respond by using not only market strategies, such as reconfiguring their value-adding

activities across nations (Delios and Ma, 2010), but also nonmarket strategies (Mellahi

et al., 2016). Indeed, nonmarket strategy is used by firms to manage the institutional or

societal context of economic competition (Baron, 1995). There have been two parallel

strands of nonmarket strategy research: strategic corporate social responsibility (CSR)

and corporate political activity (CPA) (Mellahi et al., 2016). Given the significant CSR

(Surroca et al., 2013) and CPA activities (Hillman and Wan, 2005) in the foreign subsid-

iaries of MNEs, the integration of these two nonmarket strategies may help these firms

422 D. Ahlstrom et al.

dealing with challenges derived from de-globalization movements in the New Normal

environment. Some of the more extreme populist groups have even questioned the soci-

etal value or legitimacy of the private firms with a for-profit objective, with an increas-

ingly positive reception among parts of the population in some countries. In turn, the

preference for the development of more ‘social’ forms of organizations, having broader

non-profit objectives as cooperatives or family business, has grown (Munoz et al., 2020).

The current New Normal environment is exceedingly complex with pressures for de-

globalization, often in more prominent developed economies with established institu-

tions that are changing, with simultaneous pressures for increased globalization, often in

emerging economies, enabled by improvised digital and supply chain technologies and

where inclusive institutions continue to develop and new competitors crop up and move

aggressively out from their strongholds in (previously) remote emerging economies (Lund

and Tyson, 2018; Zhu et al., 2020). Multinational enterprises must navigate across and

within these different countries trying to effectively manage and hopefully balance these

often-conflicting forces and the rising power of emerging economies and their often

more activist governments.

ARTICLES IN THIS SPECIAL ISSUE

Collectively, the nine papers included in this special issue (SI) provide a rich and insight-

ful overview of the challenges and opportunities that firms face in the New Normal

landscape and the strategies they can apply to navigate them. An overview of the papers

is presented in Table II.

The first paper by Moore et al. (2020) examined how monetary aid flows can influence

business creation in recent years. More specifically, they drew on the international polit-

ical economy literature to explore how different types of global aid flows (multilateral,

bilateral, and private aid) impact both formal and informal entrepreneurship (Ahlstrom

and Ding, 2014). Based on longitudinal data from 49 countries, the results offer strong

support for all but one of the proposed hypotheses. That is, both bilateral aid and pri-

vate aid are associated with higher levels of informal entrepreneurship, while multilat-

eral aid are associated with lower levels of informal entrepreneurship, and bilateral and

private aid are associated with lower levels of formal entrepreneurship. The findings

of the study highlight how government decisions on the acceptance of foreign aid can

motivate would-be entrepreneurs to formalize their new ventures (or not), thus showing

how differential aid pathways influence outcomes in recipient countries. That is to say,

different sources of aid can have different agency problems, and each of them interacts

in a unique way with the two types of entrepreneurs. The findings help to build a better

understanding of the New Normal landscape of international aid that has emerged in

recent years. Evidence suggests that foreign aid provides little help in terms of develop-

ment (Easterly, 2002). Yet this work by Doh and colleagues (2020) presents that a more

nuanced view of both the source of aid and the type of recipient can help to explain the

puzzle of foreign aid ineffectiveness.

The second paper, by Munoz et al. (2020), examined the relationship between pro-

social cooperatives (co-ops) and innovation in the New Normal environment. The au-

thors identified three cooperative forms of governance: The attention pack, the eclectic

New Normal Business Environment 423

Table II. Articles in the special issue

Title Authors Summaries

Does Monetary Aid Catalyse New Business

Creation? Analysing the Impact of Global Aid

Flows on Formal and Informal Entrepreneurship

Moore, Dau, and Doh The authors have explored how different types of global aid

(i.e., multilateral, bilateral and private) flows impact busi-

ness creation and formal/informal entrepreneurship. The

findings of the study help to better understand the New

Normal landscape of international aid

Packs, Troops and Herds: Prosocial Cooperatives

and Innovation in the New Normal

Munoz, Kimmitt and Dimov The authors addressed how prosocial cooperatives influence

innovation in the new normal, and how entrepreneurs use

cooperative forms of governance to develop innovative ven-

tures. The findings of the study help develop a more holistic

understanding of how innovation works in cooperatives in

the New Normal

Towards A Democratic New Normal: Investor

Reactions to Interim-regime Dominance during

Spells of Violence

El Nayal, Slangen, van Oosterhout, and

van Essen

The authors examined the democratic ‘new normal’; that is,

the new normal interim regimes in former autocratic coun-

tries initiated after a series of violence in the Arab Spring.

The findings of the study shed light on how investors cope

with the uncertainty about the emergence of a democratic

new normal during an interim regime’s tenure

Commonly-employed and Commonly-successful

Transnational Strategies: Implications for

Alleviating New-Normal Productivity Growth

Declines

Clougherty, Duso, Seldeslachts, and

Ciari

The authors examined how firms can use generic transforma-

tional (e.g., renewal and recombination) strategies to help

alleviate the new normal productivity growth decline. In

doing so, they can fully factor the impact of new normal

stagnation on the business landscape and prepare them-

selves for enhanced productivity growth in subsequent years

Navigating the New Normal: Political Affinity and

Multinationals’ Post-acquisition Performance in a

Developed Market

Hasija, Liou, and Ellstrand The authors have explored how political affinity between host

and home markets enables multinational enterprises of

emerging markets to achieve a better post-acquisition per-

formance in developed markets. The findings of the study

help the firm to navigate in the new normal by formulating

effective strategies to realize the benefits of cross-border

acquisitions

424 D. Ahlstrom et al.

Title Authors Summaries

The bribery paradox in transition economies

and the enactment of ‘New Normal’ business

environments

Eddleston, Banalieva, and Verbeke The authors have uncovered a bribery paradox in which the

purposes of paying bribes are different, depending on the

time horizon. Moreover, they have found the perception of

entrepreneurs toward their business environment is influ-

enced by their identity and the associated social context

The emergence of proto-institutions in the new

normal business landscape: Dialectic institutional

work and the Dutch drone industry

Smolka and Heugens The authors have presented a process model that reveals how

new regulatory structures evolve in the new normal busi-

ness landscape; that is, enterprises and regulators will work

together in shaping the institutions of the future

The Roles of Chinese CEOs in managing indi-

vidualistic cultures in cross-border mergers and

acquisitions

Zhu, Zhu, and Ding The authors have explored how the different levels of indi-

vidualistic cultures in host countries affect the success of

cross-border mergers and acquisitions (CBMAs). The find-

ings can be of great relevance particularly to other develop-

ing economies that are seeking to learn from Chinese firms’

experiences in the process of internationalization

Thriving in the New Normal: The HR microfoun-

dations of capabilities for business model innova-

tion. An integrated literature review

Loon, Otaye-Ebede, and Stewart The author has explored how the microfoundations of human

resources (HR) enable business model innovation (BMI)

to work in the New Normal. The findings of the study

provide practical steer to senior organizational executives

in terms of the direction and emphasis of the HR practices

as well as of the essential capabilities for BMI in complex

environments

Table II. Continued

New Normal Business Environment 425

troop, and the wondering herd, that allow for collaboration and more democratic deci-

sion-making necessary for the development of innovative solutions in the faster moving

New Normal landscape, characterized by vastly improved communication and collab-

oration technologies. A New Normal environment not only provides new opportunities

for innovation, collaboration, and alliances but can also impact the fitness of different

organizational forms (Sternad et al., 2017). Using configurational analyses of organiza-

tional enablers leading to innovation in 40 entrepreneurial cooperatives in Chile, Munoz

and colleagues (2020) show how entrepreneurs can use cooperative forms of governance

to develop innovative ventures. The results indicate that the three forms of governance

represent distinct social groups that leverage different types of leadership, coordination,

and survival tactics when experiencing uncertain and challenging environments. More

specifically, collective ownership and decision-making do not constitute a drawback that

restricts performance. As such, co-ops embracing traditional ways of organizing no lon-

ger need to isolate themselves from rivals using other organizational forms (Kennelly,

2001). The findings of the study help develop a more holistic understanding of how

co-ops and related organizational forms such as mutual organizations can be competi-

tive and undertake the innovation and new venture creation needed in the increasingly

competitive New Normal landscape.

The third paper by El Nayal, Slangen, van Oosterhout, and van Essen (2020), ex-

amines the reaction of investors to spells of violence and governmental upheaval stem-

ming from the Arab Spring of 2010. The interim regimes in former autocratic countries

emerged after a series of violent upheavals in the North African countries of Egypt,

Libya, Tunisia, Sudan and elsewhere. The authors argued that investors interpret higher

interim-regime dominance as a signal of weaker democratic intentions and thus associate

such weaker intentions with a gloomier political outlook for the firms operating in such

an interim period and location. As such, investors in the local stock market are expected

to react (more) negatively to spells of violence characterized by higher interim-regime

dominance. Using a detailed database of 94 separate spells of violence in Egypt during

the Arab Spring period, they found strong support for their hypotheses. The findings

shed light on how investors cope with the uncertainty accompanying the emergence of a

political New Normal during an interim regime’s tenure. Meanwhile, investors perceive

firms to be differentially resilient to the more adverse political outlook associated with

higher interim-regime dominance.

The fourth paper, by Clougherty et al. (2020), addressed how firms can use generic

transformational strategies to help alleviate the New Normal productivity growth slow-

down, that is, the seeming stagnation in economic dynamism occurring in more de-

veloped economies (Gordon, 2015). They suggest that a sustained lack of productivity

growth can actually prove to be a key driver of transformational activities, contributing to

productivity improvements and economic growth (Anzoategui et al., 2019; Christensen

and Raynor, 2013; Tomizawa et al., 2020). Using the data on 26 industries in the US over

a 15-year period, they found that the firms using the renewal (i.e., enhancing R&D) and

recombination (i.e., outward-vertical M&A) transformational strategies are better able

to address the capability and productivity threats as compared to other transformation

strategies including retirement from the market, retrenchment, replication, and redeploy-

ment. In other words, renewal and recombination represent the only transformational

426 D. Ahlstrom et al.

strategies that are generally successful in helping firms regenerate growth (Olson and

van Bever, 2008). The firm may find it useful to fully factor in the effect of New Normal

stagnation on the business landscape and change their strategies (also their breadth of re-

sources) particularly during a period of decline, leading to enhanced productivity growth

for the firm in subsequent years (Christensen and Raynor, 2013).

The fifth paper, by Hasija et al. (2020), explored how political affinity between host and

home markets helps MNEs to achieve a better post-acquisition performance in the US,

the largest developed economy. Studying the MNEs of 45 countries that were engaged

in cross-border M&A deals in the US over a 9-year period (2004–12), they found strong

support for the hypothesis that MNEs from countries with greater political affinity with

the US experience higher post-acquisition performance in the US. They suggest that the

New Normal international business (IB) landscape is reflected in the world’s economic

volatility and political upheavals. In contrast with the great bulk of studies indicating the

significant influence of political risk on MNE operations in emerging economies, such

risk also affects their performance in developed economies. Therefore, the positive bene-

fit of political affinity is of particular importance for the MNEs home based in emerging

economies that have already operated or seek to operate in a more developed economy,

through cross border M&A, which is becoming more common with firms from China

and India. In the New Normal environment, acquisitions tend to be successful when

levels of political affinity are high. The findings provide an understanding of how firms

can navigate in the New Normal environment by formulating effective strategies to re-

spond to the challenges facing MNEs from emerging economies managing in unfamiliar

institutional environments.

The sixth paper, by Eddleston et al. (2020), deals with a long-standing problem of brib-

ery in transition economies focusing on why some entrepreneurs are more likely to pay

bribes than others. Drawing upon a sensemaking logic, they sought to uncover a bribery

paradox in which entrepreneurs may pay bribes in an effort to reduce obstacles and

gain (unfair) competitive advantage in the short run, but, at the same time, they may be

enacting a long-term, New Normal business environment that is perceived to be strewn

with institutional impediments. The novel sensemaking perspective challenges the (tradi-

tional) assumption that posits an immediate benefit gained from offering bribes. Using a

sample of 310 privately-held small and medium-sized enterprises (SMEs) from 22 transi-

tion economies, they found empirical support for their framework and the presence of a

‘bribery paradox’. Moreover, the perception of their business environment is influenced

by the firm’s identity and the associated social context. More specifically, owners of fam-

ily and nonfamily firms view their new realities differently; that is, the clan lens of family

firm owners and the economic lens of nonfamily firm owners lead them to take different

views on bribes, with the former viewing their bribes as creating a new, hostile business

environment and the latter as reducing business obstacles.

The seventh paper is a qualitative paper by Smolka and Heugens (2020). With the

lack of a regulatory framework for evaluating new technology-enabled ventures, they

present a process model that reveals how new regulatory structures evolve in the con-

text where high levels of technological and behavioural changes induce systematic un-

certainty, and enlarge the interdependence between entrepreneurs and regulators. To

New Normal Business Environment 427

develop this process model, they have conducted a qualitative processual study of the

emergence of the Dutch remotely piloted aircraft (drone) industry. Rather than por-

traying entrepreneurs in these enterprises as heroic individuals who act opportunisti-

cally to seize opportunities, enterprises are viewed as the co-creators of their institutional

surroundings; regulators develop legal frameworks in consultation with pioneering en-

terprises, resulting in the novel regulatory institutional structures in the New Normal

business landscape that support a particular technological standard over others (Dunbar

and Ahlstrom, 1995; Jain and Sharma, 2013). Accordingly, enterprises with vested inter-

ests have incentives to change the trajectoryies of proto-institutional emergence but not

to abandon them altogether.

The eighth paper, by Zhu, Zhu, and Ding (2020) explored how the different levels of

individualistic cultures in host countries affect the success of cross-border mergers and

acquisitions (CBMAs). Using 404 Chinese firms as the sample, they found a negative

relationship between individualistic cultures (in the host country) and wealth creation

(through Chinese acquirers’ CBMA). Moreover, they have also identified individual-level

variables (i.e., CEO exposure, duality and gender) as moderators that significantly affect

the above relationship in negative and positive ways. The results help advance our under-

standing of the CBMA value creation from a culture perspective. In particular, they are

implicative to the firms of emerging economies that are competing to survive and grow

in the New Normal as CBMA represents a radical change of Chinese firms’ corporate

strategies in the global markets. The CEOs with exposure to foreign cultures need to

be equipped with the mindsets, knowledge and skills so they can manage their CBMAs

successfully by mitigating the negative effects of individualism cultures on the combined

firm (Hastings, 1999). Moreover, the male CEOs should try to reduce their directive

leadership in their CBMAs where the inputs and cooperation of the acquired firms are

vitally needed for value creation (Miao et al., 2013; Wang et al., 2008). The findings can

be of great relevance particularly to other developing economies that are seeking to learn

from Chinese firms’ experiences in the process of internationalization (Jones, 2012; Zhu

et al., 2020).

The concluding paper in the SI is also a qualitative review paper by Loon, Otaye-

Ebede, and Stewart (2020). They sought to further explore the process of innovation,

but in business models. They particularly explored how the microfoundations of human

resources (HR) enable business model innovation (BMI) to work in the New Normal.

To do so, the authors conducted an integrated systematic literature review of the top

peer-reviewed journal articles that are generally regarded as validated knowledge (Pfeffer

and Sutton, 2006; Podsakoff et al., 2005; Zoogah and Peng, 2019). Loon et al.’s (2020)

study built upon the work of Foss and Saebi (2017) by adopting their recommendation

to explore the antecedents of BMI that can be internal (framed as microfoundations in

this study) and external (e.g., BMI necessitated from the New Normal). The authors ar-

gued that HR architecture for BMI in the New Normal requires a unique combination

of HR systems which then enables the development of capabilities for BMI. Meanwhile,

the authors demonstrated the recursive relationship between the New Normal and BMI;

that is, the New Normal has accelerated the use of BMI as a mechanism to counter the

threats that the New Normal yields, and BMI may in turn be amplifying the conditions

428 D. Ahlstrom et al.

of the New Normal. The findings of the study also provide several practical hints for

senior executives in terms of the direction and emphasis of firm HR practices (Huang

et al., 2016). BMI must be on the agenda of senior executives operating in complex

environments reflecting New Normal (Christensen et al., 2016). All senior management

should try to develop an organizational climate and growth mindset that is conducive for

a development-led HR architecture to thrive (Dweck, 2007; McCall, 1998).

FUTURE RESEARCH

A key factor that has emerged from the New Normal environment of the past decade

or so is that context matters greatly in the management and success of businesses and

other organizations, and seemingly small events can exert their influence on firms over

great distances. The world of radical and difficult-to-predict political movements and

change such as the Arab Spring, Brexit, recent protest movements, and the new nation-

alist tendencies and their direct and indirect impacts on organizations as we have dis-

cussed highlight one leg of this New Normal environment. The second leg involves new

computer and communications technologies which enable worldwide competitors and

disruptive innovations, which are developed and introduced rapidly, often to undermar-

kets that can adopt the simpler technologies quickly (Ahlstrom, 2010; Christensen et al.,

2018). This has further led to substantial advancements in digitization and availability

of substantial amounts of information (‘cybernation’) as these disruptive innovations in

computer, communications, and production take hold (Cukier, 2019; Etzioni, 2015). We

not only need more research on the characteristics and meaning of this New Normal en-

vironment, we also need a better understanding of how firms can respond to this highly

complex, dynamic and uncertain environment, particularly in emerging economies (Jain

and Koch, 2020). Firms may need to develop organizational hybridity, organizational

agility and managerial dynamic capabilities to respond to the New Normal environment

in which they now exist. Yet, we know little about how firms build these attributes and

capabilities and can respond to sudden events emerging from far off locations which can

threaten firm operations. In this section, we introduce a set of research questions that

need to be addressed to build our knowledge about organizations and specific under-

standing of managerial practices in the new normal.

A hybrid organization is one that integrates different strategies, logics, structural forms,

and other key elements. Smith and Besharov (2019) suggest that effectively maintaining

hybridity often requires structural flexibility. National institutions often have strong influ-

ences on industry environments within a country (Hitt et al., 2020). As a result, industry

characteristics can vary across countries because of institutional differences thereby re-

quiring large multinational firms to maintain strategic flexibility to respond effectively in

the different markets (Jain and Sharma, 2013). Thus, hybridity can be helpful in manag-

ing complex organizations that operate in multiple international markets. Based on this

information, following are potential questions for future research:

RQ 1: What are the characteristics of a hybrid multinational organization that operates in multiple markets

each in countries with unique institutional environments?

RQ 2: How do large complex organizations operating in multiple markets achieve structural flexibility?

New Normal Business Environment 429

Firms must not only be able to deal with multiple and perhaps conflicting logics, which

may require several different types of structure and foci, they must also be able to make

changes in strategy and structure and sometimes do so quickly. Thus, they need to de-

velop and maintain organization agility which is the ability to design and implement

changes effectively. To this end, firms may need to develop fluidity and rapidity (action

quickness) (Doz and Kosonen, 2007). This information suggests a potential question for

future research:

RQ 3: How do firms truly build a fluid organization that can change quickly?

We know that, to make changes, firms often have to overcome resistance to change.

However, to make the change quickly while also well-accepted, they must ensure that

a growth mindset is present in the organization to encourage innovative thinking, re-

silience, and learning from mistakes (Dweck and Yeager, 2019). In particular, a growth

mindset needs to be prominent in the organization’s leadership, which allows for more

trial and error learning, and reduces resistance to experimentation and change (Dweck,

2007, 2014). Therefore:

RQ 4: How do large complex organizations achieve continuously low resistance to change across the whole

organization (in all operations often in multiple markets)?

Certainly, it is important for firms to be flexible, able to take quick actions and operate

with different and conflicting logics (Tilleman et al., 2020), Yet, more is required as they

must be able to diagnose situations and determine when they need to make changes,

design those changes and then implement them effectively. To do so, requires that they

have dynamic managerial capabilities to create, extend, and modify the firm’s opera-

tions to earn valued returns (Helfat and Martin, 2015). Doing so requires that managers

effectively orchestrate their resources which includes investment in resources (acquiring

and developing), divesting less valuable ones, integrating them (bundling) to create firm

capabilities and then deploying the capabilities through actions taken (Sirmon and Hitt,

2009). Kor and Mesko (2013) suggest that dynamic managerial capabilities are attributes

not of individuals but rather of managerial teams. Although it has been common for top

management teams to be dominated by a powerful CEO, dynamic capabilities in order

to be agile requires the integration of all team members’ talents whereby they cross fer-

tilize each other to make better decisions and share the tasks required in the implementa-

tion of changes thereby supporting their individual and group efforts (Xing et al., 2020).

These ideas suggest the following research question:

RQ 5: How do large complex organizations with many managers and many managerial teams at multiple

levels develop dynamic managerial capabilities throughout the firm?

In the new normal environment with high uncertainty, firms not only must change

but must do so quickly in order to adapt to the unique environment (e.g., new com-

petitors with disruptive innovations, major institutional changes with new requirements

for adaptation) to avoid suffering negative consequences. Yet, while research has found

that groups frequently make higher quality decisions (than do individuals), they often

430 D. Ahlstrom et al.

are slower to achieve a decision. And, in some cases, groups can suffer from groupthink

which devalues and discourages the potential synergy from integrating their complemen-

tary capabilities and can create group polarization or rushed decisions (Baron, 2005).

Therefore, this question can be asked:

RQ 6: How can managerial teams in the New Normal environment make not only high-quality changes but

do so in a time-efficient manner?

Successful firms have been known to suffer from a ‘winner’s curse’ (Thaler, 1991).

Popular notions of a ‘winner’s curse’ suggests that a person may be overly optimistic such

that s/he overestimates the value of an asset and thus pays too much for it or overesti-

mates its potential benefits and, then, does not gain the expected value from it after it is

acquired. Our focus is on the firms that have been highly successful and thereby become

market leaders. Research has shown that these firms often try to protect their current

position and avoid taking risks and making changes (Shimizu, 2007). So, they are focused

on avoiding losses instead of seeking new opportunities and gains. Therefore:

RQ 7: How can highly successful firms overcome the type of ‘winner’s curse’ noted above and make changes

in the products and strategies that helped them achieve past successes in order to adapt to the realities of

the New Normal environment?

Managing large complex organizations such as MNEs can be challenging, at times

burdensome and stressful. And, in the dynamic New Normal environment in which there

is significant uncertainty and pressure to make changes quickly, perhaps even to survive,

these challenges are even greater. Research has shown that leaders who make major

changes can produce major benefits for the organization, but they also experience much

stress and emotional exhaustion (Lin et al., 2019). These notions suggest the following

research questions:

RQ 8: Do managers in the New Normal environment experience burnout faster than in previous times?

RQ 9: Are certain types of major changes more stressful than others (e.g., disengagement with existing mar-

kets; coping with technological disruptions)?

RQ 10: Does developing managerial teams with dynamic capabilities reduce managerial stress and burnout

(e.g., because the group shares responsibility and the stress and have a group coping mechanism)?

Large MNEs operating in multiple international markets across the globe and with

multiple networks of suppliers and other stakeholders may find the New Normal envi-

ronment to be especially challenging, even though they are accustomed to dealing with

substantial complexity. There are many research questions relating to the MNEs in this

environment, such as the differing institutional environments of emerging economies,

complex supply chains and security issues (Otuoze et al., 2018; Young et al., 2014). In

addition, deglobalization has been a concern in the New Normal as trade levels off, FDI

falls, and countries seek new, regional trade deals (Rodrik, 2019; Witt, 2019). Yet as pa-

pers in our special issue demonstrate, developing economies are seeking to enter the glo-

balization game through cross border merger and acquisitions; China, for example, has

increasingly seen its firms participate in cross border acquisitions (Zhu et al., 2020). The

New Normal Business Environment 431

current environment is characterized by an iterative cycle, shifting from globalization to

deglobalization. In a way, the New Normal is actually characterized by the co-existence

of globalization and deglobalization. Following is a sampling of such questions:

RQ 11: How can large MNEs best deal with their international supplier networks in an environment of

deglobalization?

RQ 12: How can large MNEs effectively deal with the growing lack of MNEs’ legitimacy existing in some

countries?

RQ 13: How and with whom do MNEs build political ties across countries varying in levels of nationalistic

policies, some of which frown on relations with governments of other nations?

RQ 14: How can MNEs deal with cybernation, and its corresponding strategic challenges and opportunities?

CONCLUSION

Firms are experiencing a New Normal environment of slowing globalization, increased

competition (and cooperation) enabled by new computer and communications technol-

ogies, and an institutional landscape whereby governments, NGOs and even individ-

uals can substantially influence firm operations, sometimes from the other side of the

globe (Etzioni, 2015; Yan et al., 2019). Sociopolitical movements can likewise create

major challenges for firms as they struggle to conduct operations amidst upheavals, flu

outbreaks, and major institutional change in their regions or those of their customers. If

this article and special issue could have one primary message, it would be that top man-

agement can no longer confine itself to decisions about product markets, competition,

and operations. De-globalization, institutional change, government participation in,

and interference with business, sociopolitical movements, rapid communications, digital

crime, and disruptive innovations all constitute the New Normal and require watchful

preparation. And it is thus important for managers to remember that the world is not flat

but rather is round, and events on one side of the globe, even those in a Parisian neigh-

bourhood or a seafood market in central China, can have significant implications for

firms anywhere. Top managers have a major role in responding to this challenging new

environment, where competition as well as crises can emerge suddenly, but significant

opportunities also abound in this New Normal.

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Full-text available

Jun 2024

The main purpose of this empirical study is to find the evidence to establish the relationship between two intrinsic variables psychological capital and knowledge-sharing behavior. However, knowledge-sharing behavior is an individual’s dependent and intrinsic nature. Psychological capital is the positive psychological effects of the individual’s commitment and performance in the organization. This study aims to find the psychological effect of scientists on their knowledge-sharing behavior. The study includes a survey technique through a structured questionnaire and data was collected from scientists of the Indian Council of Agricultural Research (ICAR) in India through a structured questionnaire. The collected data was analyzed by using Structural Equation Modelling (SEM) using LISREL10.1. The result shows that the model fit indices were within the acceptable limits showing a positive and significant relationship between psychological capital (hope, efficacy, resilience, and optimism) and knowledge-sharing behavior. The findings of the study confirm psychological capital measured in terms of hope, efficacy, resilience, and optimism positively affect the knowledge-sharing behavior. This research work has also its own limitations that can be addressed in future research. To measure knowledge sharing behavior we considered only the self-rated method and ignored the supervisory rated method. Other points are further discussed in the paper. The implications of the study discussed the need for designing an appropriate support system to enhance psychological capital in ICAR. This study provides insights to policymakers and researchers to uncover the importance of human capital. The limitations and future research direction are further discussed in the paper.

EXAMINING THE IMPLICATIONS OF THE FOURTH INDUSTRIAL REVOLUTION ON ONLINE RETAIL PLATFORMS: AN EMERGING MARKET PERSPECTIVE

Chapter

Feb 2024

Management is an art of getting things done through and with the people in formally organized groups. It is an art of creating an environment in which people can perform and individuals and can co-operate towards attainment of group goals. Management Study HQ describes Management as a set of principles relating to the functions of planning, directing and controlling, and the application of these principles in harnessing physical, financial, human and informational resources efficiently and effectively to achieve organizational goals. A good management is the backbone of all successful organizations. And to assist business and non-business organizations in their quest for excellence, growth and contribution to the economy and society, Management Book Series covers research knowledge that exists in the world in various management sectors of business through peer review chapters. This book series helps company leaders and key decision-makers to have a clear, impartial, and data-driven perspective of how factors will impact the economy moving forward and to know what they should be doing in response.

ENTREPRENEURSHIP IN EMERGING MARKETS AND THE 4TH INDUSTRIAL REVOLUTION: OPPORTUNITIES AND CHALLENGES

Chapter

Feb 2024

Factors for Digital Entrepreneurship Success on the African Continent: A Systematic Literature Review

Chapter

Full-text available

Jun 2024

Researchers have widely recognized the vital role of technology within the small business context. This recognition appears actuated by a set of related local and international drivers. These drivers include (and are not limited to) globalization affecting business operations. Some have even argued that introducing technology within the business space is a new form of globalization. However, as far back as the nineteenth century, calls to explore the role technology could play in leveraging business performance, especially among small businesses, began to take center stage. This has led to growing calls for the need to understand how organizations may need to respond to this new form of globalization. We explore the capabilities as motivators that influence the success of digital entrepreneurship on the African continent. A systematic literature review was conducted. A total of twenty articles from the African continent were included in the analysis. Notably, the factors needed for digital entrepreneurship success include the need to balance human and technology capabilities, summarized as a Context-Structure-Technology (CST) nexus. Based on this finding, the chapter proffers suggestions on how digital entrepreneurship development can be supported. The findings can be helpful to policymakers in their quest to propel the digital entrepreneurship space on the African continent.

Modern models for predicting bankruptcy to detect early signals of business failure: Evidence from Montenegro

Article

Full-text available

May 2024
PLOS ONE

This paper explores predicting early signals of business failure using modern models for bankruptcy prediction. It reviews how continuous operations enhance market value, strengthening competitiveness and reputation among stakeholders. The study involves medium and large companies in the Montenegrin market from 2015 to 2020, comprising 30 bankrupt and 70 financially stable firms. Logistic regression is also employed to create a logit model for early detection of bankruptcy signals in companies. This research establishes the empirical validity of modern models in predicting business failure in the Montenegrin market, particularly through logistic regression. Significant indicators, such as the Degree of Indebtedness (DI) and turnover ratio of business assets (TR), exhibit strong predictive power with a p-value less than 0.001 according to Likelihood ratio tests. The paper underscores the potential benefits of bankruptcy prediction for both internal and external stakeholders, especially investors, in enhancing the competitiveness of Montenegro’s large and medium-sized companies. Notably, the research contributes by bridging the gap between theory and practice in Montenegro, as bankruptcy prediction models have not been extensively applied in the market. The authors suggest the possible applicability of the created logit model to neighboring countries with similar economic development levels. In that sense, the concept of predicting bankruptcy is positioned as integral to corporate strategy, impacting the overall reduction of bankruptcies. The paper concludes by highlighting its role as a foundation for future research, addressing the literature gap in the application of bankruptcy prediction models in Montenegro. The created logit model, tailored to the specific needs of Montenegrin companies, is presented as an original contribution, emphasizing its potential to strengthen the competitiveness of companies in the market.

Algorithmic management and control at work in a manufacturing sector: Workplace regime, union power, and shopfloor conflict over digitalisation

Article

Full-text available

May 2024
NEW TECH WORK EMPLOY

Mathieu Dupuis

It is often stated that algorithmic management disrupts control regimes and enables employers to dictate the work effort level. This article argues that control at work must be conceived through inherent tensions in employment relations and contradictions that result from the implementation of technologies in workplaces. Building analytically on two theoretical approaches (workplace regimes and power resources), conflicts over algorithmic management on the shopfloor are conceptualised through structural characteristics of workplaces and strategic factors related to workers' power. To illustrate these tensions, qualitative data is mobilised from a case study of the aluminium industry in Québec (Canada), where algorithmic management was implemented to advance efficiency and intensify work. The main contribution of this article is to highlight the persistence of an 'embedded control regime', which we explain through the structural characteristics of the sector under study (technology, production, and market) and the power resources mobilised by workers and unions. This study advances knowledge on the deployment of algorithmic management beyond the 'gig economy' by exploring the avenues through which workers and unions can effectively contest such technologies in the workplace.

A review of the impacts and implications of webAR on the 4Ps

Article

Full-text available

Jan 2024

Kishokanth Jeganathan

Examining the Potential for Use of ChatGPT in Recruitment for Hotel Businesses

Chapter

Jun 2024

This research reveals that the integration of ChatGPT into recruitment processes in the hotel and tourism sector provides significant advantages in terms of time and cost. ChatGPT analyzes candidates' resumes and includes detailed information about their general characteristics, strengths and weaknesses, and suitability for departments. This automated process ensures that candidates are evaluated objectively, allowing for fair recruitment free from emotional interactions. It also helps businesses select the most suitable candidate, reduce costs, and improve service quality. This proposed use can provide competitive advantages to businesses by increasing the efficiency of their recruitment processes. Therefore, it is foreseen that ChatGPT, as a digital assistant in the tourism sector, will be beneficial. ChatGPT can enable businesses to manage their recruitment processes more effectively and efficiently, enabling them to maximize the benefits of artificial intelligence.

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

Article

Jun 2024

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.

Economic growth, innovation, institutions, and the Great Enrichment

Article

Full-text available

Mar 2020
Asia Pac J Manag

A number of factors are held up as causes of the economic takeoff of the early 1800s in northwest Europe and North America and later Asia, though certain popularly believed factors such as geography and capital accumulation do not have much empirical support. Nor do other commonly held factors such as trade, plunder, and colonization. It is better understood today that productivity enhancing innovation, new venture and new market creation enabling consumption by a wider range of consumers yield firm and economic growth, as well as improved standards of living. In this overview, these literatures are summarized and examined. In addition the evidence regarding the effect of institutions on economic growth is discussed as well as the role of international business in the transfer of positive institutions and organizational routines.

Institutions, Industries and Entrepreneurial versus Advantage-based Strategies: How Complex, Nested Environments Affect Strategic Choice

Article

Full-text available

Mar 2021
J Manag Govern

With primary and secondary data on 658 firms from 17 countries across three continents, we examine the combined influence of country-level institutions on industry attributes and in turn their effects on the choice of a defensive advantage-based strategy and an entrepreneurial strategy. We find that strong and efficient institutions constrain both dynamism and munificence in industries. In turn, industry dynamism has a negative effect on both entrepreneurial and advantage-based strategies. However, firms having strong relational capital with important stakeholders can better navigate these uncertain environments to employ both strategies with increasing strength. Alternatively, in more munificent environments, firms are less likely to employ advantage-based strategies and more likely to employ entrepreneurial strategies. This study demonstrates the environmental conditions under which firms are more-or-less likely to employ entrepreneurial strategies and defensive advantage-based strategies.

Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World

Book

Jan 2016

Deirdre Nansen McCloskey

Understanding the New Normal: The Role of Demographics

Article

Oct 2016

Since the onset of the Great Recession, the U.S. economy has experienced low real GDP growth and low real interest rates, including for long maturities. We show that these developments were largely predictable by calibrating an overlapping-generation model with a rich demographic structure to observed and projected changes in U.S. population, family composition, life expectancy, and labor market activity. The model accounts for a 1¼–percentage point decline in both real GDP growth and the equilibrium real interest rate since 1980—essentially all of the permanent declines in those variables according to some recent estimates. The model also implies that these declines were especially pronounced over the past decade or so because of demographic factors most-directly associated with the baby boom and the passing of the information technology boom. Our results further suggest that real GDP growth and real interest rates will remain low in coming decades, consistent with the U.S economy having reached a “new normal.”

Global value chains and development: redefining the contours of 21st century capitalism

Article

Sep 2019

Ari Van Assche

The global value chain (GVC) framework has taken the development policy world by storm. Since its academic origins 25 years ago, the framework has rapidly evolved into a major paradigm that is used by a wide range of international organizations, including the International Labor Organization, the United Nations Conference on Trade and Development, the World Bank and the World Trade Organization. The policy appeal of the framework lies in the developmentalist angle that academic pioneers such as Gary Gereffi have provided to GVC thinking. Starting from the premise that global lead firms have the corporate power to define the terms and conditions of supply chain membership, Gereffi (among others) has focused on the consequences of the expansion of GVCs into developing countries on local firms and workers, and has studied the policies that enhance upgrading prospects. In Global Value Chains and Development, Gereffi traces back the intellectual foundations and evolution of the GVC framework through a compilation of 2 original essays and 13 of his most influential articles. The introduction, which is an original contribution, is the book’s most personal chapter. Gereffi describes the dominant perspectives on the international economy and development in the 1970s and 1980s (modernization, dependency and world-systems theory) and explains how they helped set the stage for the emergence of the GVC framework. He skillfully intertwines the discussion with his own experiences and successes as a graduate student and young scholar, decidedly showing how his interactions with international organizations were present from the start of his academic career.

Thriving in the New Normal: The HR Microfoundations of Capabilities for Business Model Innovation. An Integrated Literature Review

Article

Feb 2020

Firms need to respond to the increasing competition and change of the current New Normal environment by being more innovative, and especially in developing new business models. This paper seeks to explore how microfoundations, particularly with respect to human resource management, play a key role in facilitating innovation in business models through the development of key needed capabilities. Four themes are identified with respect to business model innovation (BMI) in the New Normal: BMI as an enabler to create and operate across industries and product‐markets; BMI as a mechanism for firms to better navigate changing institutional landscapes; BMI as giving rise to business model portfolios; and concurrent and cumulative innovations that can lead to BMI. This paper also develops a conceptual framework that presents a synoptic view of the five essential capabilities for BMI, which include analogical reasoning, sensemaking, dynamic capabilities, organisational ambidexterity, and organisational learning. Finally, it is shown how the microfoundations of a bespoke, development‐oriented BMI HR architecture can support the advancement of these capabilities and thus contribute to the strategic HR literature.

The Roles of Chinese CEOs in Managing Individualistic Cultures in Cross‐border Mergers and Acquisitions

Article

Jan 2020

The individualism‐collectivism culture represents an important and well‐researched distinction across cultures. Yet research is less clear about how the different levels of individualistic cultures in host countries affect the success of an increasingly important firm strategy ‐ cross‐border mergers and acquisitions (CBMAs). This study addresses this key research question in the context of Chinese firms’ CBMAs, as Chinese firms are increasingly acquiring targets outside of China in the New Normal global business landscape. This study further theorizes and tests how the Chinese acquirer CEOs’ characteristics moderate the wealth creation relationship. In an analysis of 404 Chinese firms’ CBMAs, we found that an individualistic culture in the host country is negatively associated with Chinese acquirers’ CBMA wealth creation. We also demonstrate that Chinese CEOs’ exposure to foreign culture and female gender weaken that negative relationship, while CEO duality strengthens this negative relationship. Our research thus suggests that culture in host countries can negatively affect acquirers’ CBMA performance, but CEOs may be able to manage the effects of the culture to increase their CBMA performance.

Institutional Logics and Technology Development: Evidence from the Wind and Solar Energy Industries

Article

Jan 2020

The relationship between regionally tied institutional logics and the location of organizations is an important issue in organization theory. Recent work highlights how supportive regional logics can give rise to products or organizations that resonate with these logics and how the geographic patterns that underlie industries may be understood by examining such relationships. This literature has not, however, offered deep attention to the ways in which features of technology—specifically, its inherent uncertainty—may interact with such dynamics. In this paper, we tackle the challenge. Our work examines how the level of support for an environmental-conservation logic within a region is associated with the number of wind and solar equipment manufacturers in that region in the years 1978–2006. By simultaneously exploring the effects of this logic on two similar technologies, our work not only reinforces how logics may interact with organizational activity but also shows how the magnitude and mechanisms of this effect depend on the technology in question. We build on these findings to discuss the importance of examining technologies in detail, including their dimensions of uncertainty, the role of timing in examining the effect of regionally tied logics, and the links between public policy and logics.

Towards a Democratic New Normal? Investor Reactions to Interim‐Regime Dominance during Violent Events

Article

May 2020

Although interim regimes in former autocracies are generally tasked with initiating a democratic ‘new normal’, they may privately intend to become their country’s new autocratic rulers. We argue that, to cope with the uncertainty stemming from this possibility, investors infer an interim regime’s intentions from the dominance displayed by the regime during government‐related violence, as reflected in the share of civilian fatalities. Specifically, we propose that investors interpret higher interim‐regime dominance as a signal of weaker democratic intentions and associate such weaker intentions with a gloomier political outlook for local firms. We therefore hypothesize that investors react more negatively to violent events characterized by higher interim‐regime dominance. We also hypothesize a less negative effect of such dominance for firms with larger foreign footprints, lower indebtedness, or more concentrated ownership, since investors will likely consider such firms more resilient to political deterioration. Applying event study methodology to 94 spells of violence in Egypt during the Arab Spring, we find substantial support for our hypotheses, thus contributing to management research on investor decision‐making, violence, and political uncertainty.

The Technology Trap: Capital, Labor, and Power in the Age of Automation

Book

Dec 2019

Carl Benedikt Frey

Managing Technological, Sociopolitical, and Institutional Change in the New Normal

Abstract

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