Geoeconomic Fragmentation: Structural Transformation of the Global Political Economy and Strategic Implications for International Business

Abstract

Global political economy is being transformed into the largest structural change since post-World War 2. This paper examines the topic of geoeconomic fragmentation, which is a policy-driven turning point of globalization from a global economic integration that is conducted through strategic concerns such as national security and economic autonomy. Based on recent institutional research and empirical data from 2022–2025, this paper studies the reasons, ways and economic implications of breakdown in the fields of trade, investment and technology. Additionally, this work unites international political economy scholarship and business administration by diving into how multinationals are going about strategic change in reaction to this new world through changes in their supply chains, organizations, and geopolitical risk management. The results suggest that when fragmentation is significant enough to result in substantial welfare losses, we see global GDP drops of between 2 to 7% of the economy in this more extreme case, and strategic advantage for firms to become what are called ‘connector firms’ as well as connector country.