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

• DOI: http://doi.org/10.1111/joms.12569
• Author: Jean‐Luc Arregle,Xufei Ma,Michael A. Hitt,Dries Faems,Gongming Qian,David Ahlstrom
• Date: 01 May 2020
• Published date: 01 May 2020

© 2020 Society for the Advancement of Management Studies and John Wiley & Sons, Ltd.

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 Man agement Studi es 57:3 May 2020

doi:10. 1111/j om s.1 25 69

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.

© 2020 Society for the Advancement of Management Studies and John Wiley & Sons, Ltd.

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