Non-predictive strategies for political risk management in international markets

Abstract

Purpose  This study aims to examine how Global South firms mitigate political risk when operating in armed conflict zones and politically unstable international markets. It addresses the limited understanding of how firms develop, mobilize and transfer institutional capabilities in highly unstable contexts, where traditional predictive approaches lose effectiveness. Specifically, it investigates how Brazilian firms mobilize immediate resources, relational networks and trust to transform uncertainty into opportunity, uncovering patterns of resilience, adaptability and organizational learning underexplored in the literature on the internationalization of Global South multinational enterprises.

Design/methodology/approach  This study adopts a qualitative, multiple-case design grounded in an inductive approach, examining six Brazilian firms with operations in, or exposure to, conflict-affected or politically unstable environments. Primary data comprised seven semistructured interviews conducted between February and March 2023, complemented by documentary evidence including corporate documents, media coverage, export data and institutional reports. Data were analyzed through iterative open coding, second-order theming and cross-case pattern matching, with documentary triangulation enhancing construct validity.

Findings  The findings highlight the central role of strategic partnerships in managing financial exposure, enabling market entry and navigating political uncertainty. Firms rarely rely on formal predictive models; instead, they combine commercial safeguards, trusted relationships, effectual reasoning and adaptive responses. Concrete mechanisms include trust-based distributor networks, advance-payment safeguards, institutional bricolage and rapid reconfiguration routines, alongside effectuation heuristics such as bird-in-hand and affordable loss. Networks function as relational infrastructure, providing critical information, local resources and logistical support that strengthen organizational resilience and enable firms to convert political shocks into opportunities.

Research limitations/implications  The small case sample limits generalizability, calling for comparative studies across Global South regions and sectors and for investigating whether the findings extend to multinationals from developed economies. The durability and scalability of effectuation-based responses warrant longitudinal and mixed-method research, including whether non-predictive routines become institutionalized over time and the development of measures linking effectual reasoning to firm performance under political shocks.

Practical implications  Managers of emerging multinationals and smaller exporters in fragile markets should cultivate diverse partnerships and strengthen local intermediaries, which provide legitimacy, market intelligence and operational capacity beyond what predictive models offer. Acceptable-loss rules, implemented through contractual clauses, payment safeguards or staged investments, preserve strategic flexibility and limit downside exposure, while rapid relocation routines and logistics reconfiguration enhance agility. Public policy and multilateral agencies can support these efforts through risk-mitigation instruments, internationalization programs and stronger intermediary networks.

Social implications  By showing how firms sustain operations in conflict-affected and institutionally fragile regions, the study illuminates how continued trade and investment can preserve access to essential goods, employment and local economic activity in underserved markets often abandoned by established competitors. Cases such as engagement with international institutions to improve trade facilitation and participation in humanitarian reconstruction suggest that resilient Global South firms can contribute to post-crisis recovery. Strengthening intermediary networks and risk-mitigation instruments, as recommended to policymakers and multilateral agencies, may foster more stable trade links and reduce the economic isolation of politically unstable regions.

Originality/value  By specifying the microfoundations of non-predictive strategy, this study extends effectuation theory to political-risk settings and advances debates on the interplay among effectuation, resilience and institutions in Global South internationalization. It shows that political risk management depends less on prediction than on transforming embedded relationships into adaptive action, offering value to researchers of emerging-market multinationals and to managers sustaining international operations in volatile environments.

Internationalization of companies; Multinational enterprises; Effectuation; Political risk; Non-predictive strategies

Introduction

The contemporary international context reveals the illusion of a homogeneous world in which business could occur freely, without political, social or cultural interference (Kobrin, 2015). In recent years, significant global events, such as the COVID-19 pandemic, the Ukraine War and the Israel-Hamas conflict, have intensified tensions between globalization and deglobalization, manifesting as a contest between democracy and authoritarianism, free markets and protectionism and integration and dissociation (Acemoglu & Robinson, 2023). The coexistence of these dual logics, without a clear hierarchy, increases the levels of Volatility, Uncertainty, Complexity and Ambiguity (VUCA) in international business (Meyer & Li, 2022).

In such environments, particularly in regions affected by armed conflicts, firms face significant risks, including security threats, legal uncertainties, economic losses and challenges in maintaining stakeholder relationships, which can compromise their continuity and reputation. Nevertheless, some organizations demonstrate remarkable capacity to operate under these conditions, suggesting the existence of specific competencies for managing uncertainty and political risk (Dai et al., 2023). Carney et al. (2016) highlight that institutional capabilities not only mitigate the costs associated with institutional distance but also enable these firms to transform adverse experiences into strategic advantages in their international expansion.

Previous studies (Gammeltoft & Cuervo-Cazurra, 2021; Li et al., 2021; Napier et al., 2024; Luo & Tung, 2025) indicate that Global South Multinational Enterprises (MNEs) tend to take higher risks, apply more radical strategies and develop institutional capabilities derived from domestic experiences, as they are accustomed to operating in opaque and unstable regulatory environments. This tendency can be explained by lessons learned from domestic experiences, competitive pressures, characteristics associated with latecomer status and governmental incentives (Gammeltoft & Cuervo-Cazurra, 2021). Some of these firms accumulate substantial indirect experience through ties with foreign companies before expanding abroad or through diversification in their domestic markets (Li et al., 2021; Napier et al., 2024), particularly in large countries with significant regional disparities (Pattnaik et al., 2021). In this context, these firms transform adverse experiences into organizational learning that enhances their flexibility and resilience in complex international scenarios (Cuervo-Cazurra et al., 2018).

However, the literature offers limited insight into how firms develop, mobilize and transfer institutional capabilities in highly unstable contexts, particularly in Global South countries affected by armed conflict (Napier et al., 2024; Pitelis et al., 2024; Luo & Tung, 2025). In such environments, traditional predictive approaches grounded in planning, forecasting and assumptions of relative stability lose effectiveness as uncertainty rises (Cowden et al., 2024; Pidduck et al., 2024). Non-predictive strategies, by contrast, emphasize control rather than prediction, leveraging available means, experimentation and emerging contingencies (Alsos et al., 2020). Within this broader category, effectuation provides particularly relevant logic for action under high uncertainty because it enables firms to act with the resources at hand, secure stakeholder commitments and adapt as opportunities emerge through interaction and learning (Galkina & Jack, 2022; Alinasab et al., 2026).

This study addresses this gap by qualitatively examining the non-predictive strategies and political risk mitigation approaches adopted by six Brazilian firms operating in regions of socio-political instability. It investigates how these firms mobilize immediate resources, relational networks and trust to transform uncertainty into opportunity, uncovering patterns of resilience, adaptability and organizational learning that remain underexplored in the literature on the internationalization of Global South multinational enterprises. In doing so, the study advances debates on the interplay among effectuation, resilience and institutions in politically unstable environments by showing how strategies grounded in contingencies and relational trust enable firms to convert uncertainty into actionable opportunities (Alinasab et al., 2026; Alsos et al., 2020; Napier et al., 2024; Pidduck et al., 2024; Pitelis et al., 2024). Practically, it provides managers of Global South multinationals with clear guidance on managing uncertainty and bolstering organizational resilience during international expansion. It shows how to leverage local and international networks, mobilize strategic resources and develop routines of flexibility and adaptation, thereby strengthening resilience, improving risk mitigation and sustaining international operations in volatile environments.

Theoretical background

The role of networks in political risk mitigation

Understanding MNEs’ operations in the international arena requires careful consideration of the political, cultural and institutional forces that shape their strategic decisions (Arikan & Shenkar, 2021). Political risk, defined as the likelihood that political decisions or events will adversely affect business interests (Czinkota et al., 2010), manifests in both macro-level factors, such as institutional structures and governance, and micro-level challenges affecting specific firms or sectors (DeGhetto, 2024). Institutional distance further amplifies the risks faced by MNEs, as differences in regulatory and normative systems between home and host countries increase the uncertainty and complexity in the global business environment (Acemoglu & Robinson, 2023). These risks span strategic, tactical, environmental, cross-cultural, currency and commercial dimensions, requiring differentiated decision-making frameworks and uncertainty-management approaches. Recent research further indicates that geopolitical shifts, such as trade wars and armed conflicts, can precipitate large-scale supply chain realignments; firms often diversify sourcing and relocate production to reduce exposure to politically sensitive regions (Yang et al., 2025).

Global South MNEs are particularly vulnerable to political risks due to fragile institutional structures and the need to establish legitimacy in host countries, which exposes them to reputational damage and dependence on unstable political alliances (Scoones, 2024; Buckley et al., 2023). These risks are often magnified by institutional barriers, including burdensome licensing regimes and bureaucratic inefficiencies, which increase transaction costs and discourage formal compliance, compelling firms to rely on informal arrangements (Qian & Qiu, 2023). On the other hand, experience in adverse domestic contexts enables some firms to develop an “advantage of adversity,” reflected in their ability to operate in volatile, corrupt or unstable environments (Ramamurti & Singh, 2009). This capability is built through routines, processes and strategic solutions that anticipate and manage abrupt changes, emphasizing flexibility in planning and budgeting, adaptation to regulatory changes and the diffusion of contextual knowledge. At the same time, mobilizing informal networks and leveraging nonmarket strategies allow these MNEs to influence the institutional environment and transform adverse experiences into competitive advantages in internationalization (Andrews & Luiz, 2024; Cuervo-Cazurra et al., 2018). In contexts of institutional voids, firms may also engage in institutional bricolage, creatively recombining available norms, ties and resources to “make do” in the absence of robust formal institutions, often transforming improvised practices into enduring routines (Muradzada, 2025).

Thus, the complexity of political risk requires Global South MNEs to balance adaptability with strategic foresight in global markets. Network theory, traditionally applied to international market selection, provides crucial insights for mitigating such risks. Hartwell & Devinney (2021) warn that the rise of populism and the COVID-19 pandemic challenge traditional models of political risk. By embedding themselves in local stakeholder networks, including firms, government bodies and NGOs, MNEs enhance legitimacy, secure critical resources and navigate institutional complexity more effectively (Gammeltoft & Cuervo-Cazurra, 2021; Pattnaik et al., 2021). Empirical evidence indicates that, in heterogeneous institutional settings, MNEs intentionally cultivate a variety of non-market ties, such as opinion leaders, local officials and community organizations, and that this compositional diversity materially increases subsidiaries’ operational flexibility and their capacity to absorb socio-political shocks (Röell et al., 2022). Consequently, such local embedding reduces vulnerability, especially in volatile environments, because alliances with local actors help manage regulatory and political uncertainty (Meyer & Li, 2022). However, firms must go beyond conventional partnerships and structure networks that balance strong ties with diverse connections to effectively anticipate and manage political changes (Reck & Fliaster, 2024).

In politically volatile contexts, multinationals must strategically structure their networks by integrating commercial and political ties to access key stakeholders, obtain regulatory insights and generate competitive advantages that enhance resilience. As Carney et al. (2016) note, by embedding themselves in host-country business networks, MNEs can build enduring trust-based relationships that sustain their operations amid unforeseen contingencies. In this way, institutional capabilities not only mitigate the costs of institutional distance but also enable firms to convert adverse experiences into strategic advantages for international expansion.

Firms that develop diversified networks, with varied partner types and relational strengths, tend to be more resilient in politically unstable environments (Reck & Fliaster, 2024). High partner diversity also expands access to complementary resources and strategic options, improving firms’ capacity to mitigate political risks and sustain operational stability (Reck & Fliaster, 2024). By integrating local and international actors, multinationals can buffer against political instability while retaining flexibility to adapt to institutional change. Networks do more than cushion exposure: they broaden the informational and relational resources through which firms act when future conditions cannot be reliably predicted (Pitelis et al., 2024; Napier et al., 2024). By providing local knowledge, trust and stakeholder commitments, they support a non-predictive logic in which uncertainty is assessed through interaction rather than ex ante forecasting (Galkina & Jack, 2022; Alsos et al., 2020). These relational resources, in turn, enable adaptive and effectual responses as conditions evolve (Alinasab et al., 2026; Cowden et al., 2024).

Non-predictive strategies in VUCA environments

In international business, particularly in VUCA contexts, distinguishing between risk and uncertainty is fundamental for developing effective organizational responses (Cavusgil et al., 2021). The VUCA concept describes environments marked by rapid and unpredictable change, multiple interdependencies and incomplete or contradictory information, which pose significant challenges to traditional strategic planning approaches (Meyer & Li, 2022; Johansen, 2017).

Risk refers to quantifiable and manageable situations in which outcomes and probabilities can be estimated using historical data or predictive models, such as exchange rate fluctuations, changes in tax regimes or variations in demand. These risks can often be mitigated through financial instruments such as hedging, insurance or derivatives contracts (Li et al., 2021). In contrast, uncertainty arises when neither outcomes nor probabilities are known, constituting “unknowns” and making modeling or pricing impossible (Pidduck et al., 2024; Dimand, 2021).

To address this challenge, firms operating in VUCA contexts must adopt adaptive, non-predictive strategies that strengthen resilience and performance by bridging the gap between managing quantifiable risks and responding to uncertainty (Napier et al., 2024). These strategies emphasize flexibility, iterative learning and the capacity to adjust as conditions evolve (Haarhaus & Liening, 2020). While predefined mechanisms such as financial hedging mitigate specific risks, contingency planning, scenario analysis and adaptive routines provide structured approaches to handle emergent uncertainties (Cavusgil et al., 2021).

Entrepreneurial networks and strategic alliances cultivate relational capabilities that improve firms’ responsiveness to external shocks (Pitelis et al., 2024). In non-predictive strategy, networks play a key role by providing weak signals, local knowledge and partner commitments that help firms assess and mitigate unpredictable risks in real time. Rather than functioning only as external support, they expand what firms can control, reduce exposure to unknowns and enable adaptive responses when prediction is not feasible (Cowden et al., 2024; Napier et al., 2024; Pidduck et al., 2024). Prior research also points to a persistent gap in explaining how managerial risk perceptions translate into concrete internationalization strategies, calling for frameworks that link perceptions, relational approaches and entry-mode choices (Eduardsen & Marinova, 2020). To address this agenda, we conceptualize non-predictive strategies as a stance centered on reconfiguring available means rather than forecasting future states, consistent with effectuation logic (Sarasvathy, 2008).

The effectiveness of adaptive strategies used by Global South MNEs to mitigate political risks depends on understanding the mechanisms that guide their development. Although prior research (Pitelis et al., 2024; Zaefarian et al., 2023) highlights the role of adaptive and relational strategies in uncertain contexts, further inquiry is needed to clarify how these approaches mitigate political risk. In these contexts, adaptive strategies emerge in response to institutional voids and environmental volatility, often relying on trust-based networks, informal governance and collaborative experimentation to sustain competitiveness and legitimacy in uncertain political environments (Zaefarian et al., 2023).

Recent research (Packard & Bylund, 2021; Sarasvathy, 2024; Alsos et al., 2020) reinforces the relevance of effectuation logic as a framework for navigating uncertainty, particularly in entrepreneurial and dynamic environments. Unlike causal logic, which assumes rational forecasting and optimization, effectuation logic is grounded in behavioral economics and emphasizes action based on available means and control over outcomes. Entrepreneurs and managers using this approach focus on leveraging existing resources to shape future opportunities rather than predicting them (Sarasvathy, 2008). The decision-making process within effectuation can be understood through four core dimensions linked to individual behavior, as illustrated in Table 1.

Table 1.
Effectuation: core facets and associated behavioral patterns

Effectuation principles	Representative managerial behaviors
Pilot-in-the-plane	Recalibrate strategies continuously in response to stakeholder feedback and evolving market dynamics
	Concentrate managerial effort and resources on actions within the firm’s control to mitigate exposure to external uncertainty
	Employ pilot projects or minimum viable products (MVPs) to generate experiential learning before full-scale implementation
Bird-in-hand	Leverage existing professional and personal networks to identify and pursue emerging market opportunities
	Apply prior domain expertise to adapt offerings or create context-specific innovations
	Optimize available internal assets to minimize reliance on external financing during early stages of market entry or venture development
Affordable loss	Commit resources incrementally and in proportion to the firm’s capacity to absorb potential setbacks
	Use low-cost experimentation to stimulate learning and reduce uncertainty
	Limit investments to levels that do not threaten the organization’s financial sustainability
Crazy quilt	Adjust business models rapidly in response to unforeseen opportunities or environmental change
	Adapt managerial practices to available resources and contextual constraints
	Avoid rigid strategic paths that restrict responsiveness and adaptation
Pre-commitments	Form early agreements with customers, suppliers and institutional partners to secure mutual commitment and reduce uncertainty
	Negotiate staged commitments with key stakeholders throughout product or service development to ensure alignment and shared risk

Effectuation theory frames uncertainty as a catalyst for innovation, emphasizing action based on controllable resources and stakeholder engagement to co-create opportunities rather than relying on prediction (Sarasvathy, 2001). Empirical evidence suggests that effectuation often outperforms causation in highly uncertain environments, except when predictive accuracy is near perfect (Zhang et al., 2023). These findings highlight effectuation’s capacity to foster adaptability and joint value creation. In this regard, effectuation and networks are mutually reinforcing: relational ties provide the means, commitments and contextual knowledge that enable firms to start from what they control (Galkina & Jack, 2022; Sarasvathy, 2008) and to shape outcomes through contingent action and iterative adaptation rather than predictive planning (Alinasab et al., 2026). Effectuation does not reject adaptation; rather, it offers a practical approach when prediction is infeasible or misleading. In international VUCA contexts, particularly in conflict-affected settings in the Global South, effectual reasoning complements contingency approaches by privileging actionable leverage over probabilistic anticipation (Meyer & Li, 2022; Packard & Bylund, 2021).

Materials and methods

This study examines how firms from the Global South, particularly those in Brazil, navigate and mitigate political risk in international operations amid instability and uncertainty. It adopts a qualitative, multiple case study design grounded in an inductive epistemological approach (Eisenhardt, 1989).

Profile of selected companies

The sampling frame comprised Brazilian firms listed on the Federal Government’s “Exporter Showcase” platform (Ministério do Desenvolvimento et al., 2024). A purposive sampling strategy was used. Firms were identified through the platform and screened against three criteria: (i) international operations in, or exposure to, conflict-affected or politically unstable environments; (ii) expressed interest in exporting to African markets; and (iii) willingness to participate in the study. In total, 39 firms were contacted via email and digital platforms; 33 did not respond or declined to participate, resulting in a final sample of six firms selected for in-depth case analysis.

Given the sensitivity of the subject matter, the company identities were kept confidential and are referred to as Organizations A to F. Identifying details were removed from quotations and descriptive passages. Table 2 presents the profiles of the selected companies.

Table 2.
Profile of selected companies

Organization	Industry	Brief description
A	Food and beverage (dairy-based products)	Privately held firm with 22 years in the market. Began internationalization in 2005 via exports and local representation, operating across Latin America, the Caribbean and Africa (e.g. Bolivia, Peru, Uruguay, Argentina, Angola, Senegal). Combines direct exports, strategic alliances and product adaptation to regional markets
B	Arms manufacturing	Private company with 101 years of experience and 490 employees. Initiated global expansion in 1971 through trade fairs; now exports to the United States, Canada, Argentina, Malawi and South Africa. Relies on direct exports and partnerships with international distributors to manage diverse regulations and market demands
C	Construction machinery (ecological brick presses)	Manufacturer with 30 years of experience and annual revenue of BRL 25 million. Began exporting in 2003 through passive sales and now serves 77 countries. Recently appointed a commercial representative to pursue more proactive international market engagement
D	Industrial machinery (sewing and packaging equipment)	Company with 63 years of experience, BRL 15 million in annual revenue, and 70 employees. Entered international markets three decades ago via a strategic partnership; currently exports to more than 90 countries. Transitioning toward independent internationalization using commercial representatives, starting with Kenya
E	Ceramics and water filtration	Firm with 75 years of experience and 203 employees. Initiated internationalization in the late 1970s through commercial representation and now distributes in over 40 countries, including the USA, Spain, Italy, the UK, Switzerland and Venezuela. Offers gravity and pressure filters and complementary accessories for water purification
F	Wine and sparkling wine production	Privately owned company with 91 years in the market, employing 520–600 workers and reporting BRL 740 million in 2021 revenue. Began exporting early and now reaches 18 countries, accounting for 2% of total revenue. Portfolio includes wines, sparkling wines and grape-based beverages for multiple market segments

Data collection and analysis

Data collection combined primary and secondary sources, integrating documentary evidence with semistructured interviews with firm representatives involved in internationalization. Primary data comprised seven remote interviews conducted via video or telephone between February and March 2023 for pragmatic and safety reasons. A common interview protocol (see Appendix) ensured consistency across cases while allowing case-specific themes to emerge, as detailed in Table 3. All interviews were recorded and transcribed verbatim, generating 28,155 words that supported both within-case and cross-case analyses. Secondary data included firm websites, corporate documents, press and media coverage, export data and, when available, trade and institutional reports. These materials were systematically used to corroborate interview evidence and enhance construct validity through data triangulation. Full details are reported in Table 3.

Table 3.
Sources of empirical data

Case	Interviewee(s)	Interview themes	Documentary sources
A	A01 – Export manager (56 min)	Internationalization via exports, traders and representatives; effects of instability; opportunities in Africa; institutional support; role of fairs; data-driven market selection	Firm website; corporate materials; press/media coverage; export data; trade and market intelligence reports. (n = 9)
B	B01 – Foreign trade manager (61 min)	Entrepreneur-led accelerated internationalization; expansion via trusted distributors; regulatory restrictions in conflict zones; trust in distribution; role of fairs; market withdrawal under political risk	Firm website; corporate materials; press/media coverage; regulatory and compliance documents; export data (n = 8)
C	C01 – Marketing director (52 min); C02 – Commercial director (65 min)	Passive internationalization; logistical disruptions in Africa; conflict effects on institutions and labor; attempts to access UN-linked opportunities; apex support; passive selection and emerging digital prospecting	Firm website; corporate materials; press/media coverage; export data; institutional reports; NGO and public agency documents. (n = 11)
D	D01 – Administrative director (58 min)	Passive internationalization via representatives; Venezuelan subsidiary closure; shift to representative-based operations; public program support; competition from Chinese imitation products	Firm website; corporate materials; press/media coverage; export data. (n = 7)
E	E01 – Export manager (48 min)	Partner-based internationalization; gradual expansion via representatives; opportunities from competitors’ supply disruptions; low perceived political risk; reliance on partner networks; participation in trade fairs	Firm website; corporate materials; press/media coverage; export data; partner and market reports. (n = 8)
F	F01 – Foreign trade supervisor (60 min)	Internationalization via fairs and representatives; de- and re-internationalization after buyer dependence; opportunities from sanctions and trade diversion; institutional support; market reprioritization	Firm website; corporate materials; press/media coverage; export data; public agency reports; industry association documents. (n = 10)

The coding process followed an iterative logic (Saldaña, 2021). All transcripts were first read in full to ensure familiarity with the data. Initial open coding was then conducted, guided by literature-derived categories while remaining receptive to emergent themes. First-order codes were subsequently clustered into second-order themes through constant comparison and analytic memo, followed by cross-case pattern matching. This process yielded bidirectional code structures, including: (i) impacts suffered versus exploited opportunities; (ii) political risk perception versus mitigation strategy; (iii) institutional barriers versus institutional support; and (iv) effectuation principles under political risk. During this iterative process, recurrent disruption patterns converged into broader shock categories. Iteration between the empirical material and the political-risk literature refined distinctions among geopolitical and security shocks, political crises, institutional and regulatory shocks and economic shocks. Together, these categories provide the analytical scaffold for interpreting firms’ responses to political risk. Cross-case comparisons identified recurring patterns and refined emerging propositions, while documentary triangulation enhanced the credibility and robustness of the findings.

Discussion of findings

Overall, the findings suggest that firms operating in politically unstable environments rarely rely solely on formal predictive models. Instead, they combine commercial safeguards, trusted relationships, effective reasoning and adaptive responses to manage uncertainty and exploit opportunities resulting from geopolitical disruption. Across the cases, political risk emerged as overlapping geopolitical, political, regulatory and economic disruptions, reinforcing the multidimensional nature of uncertainty in Global South internationalization and the limits of predictive planning alone (Napier et al., 2024; Yang et al., 2025). Table 4 summarizes the four politically driven shock categories emerging from the analysis, outlining their definitions, associated cases and links to prior research while illustrating how firms were often exposed to multiple shocks simultaneously.

Table 4.
Political-driven shock categories across cases

Shock (definition)	Illustrative case episodes	Illustrative quotes	Relation to prior research
Geopolitical and security shocks: Armed conflict, war, sanctions, embargoes and abrupt disruptions to cross-border flows	Haiti crisis and temporary suspension of operations (a); supply-chain disruption and market reprioritization after the Russia–Ukraine war (A, F); port disruption in Côte d’Ivoire (C)	“Many companies don’t want to be present and we had little competition in the market” (A01). “These buyers from Russia were left with nowhere to buy wine. So, they looked for other origins and Brazil was one of them” (F01)	Consistent with research showing that armed conflict and geopolitical fragmentation disrupt trade flows, reconfigure supply chains and force firms to reroute, relocate or diversify operations (Yang et al., 2025; Buckley et al., 2023; Schoones, 2024)
Political crises: Regime deterioration, democratic erosion and broader instability that undermine market functioning and partner continuity	Temporary suspension in Haiti (A); loss of a key partner in Venezuela amid democratic erosion and crisis (C); reliance on trusted representatives in politically stable destinations (D)	“Venezuela began encountering problems. Business owners realized it was unsustainable and heading towards chaos” (C02). “We usually enter markets where a trusted local contact already exists” (D01)	Resonates with studies indicating that institutional fragility and unstable political alliances increase legitimacy challenges, reputational risks and the complexity of operating abroad (Acemoglu & Robinson, 2023; DeGhetto, 2024)
Institutional and regulatory shocks: Sudden legal restrictions, licensing barriers, treaty-based limitations, customs frictions and bureaucratic delays	Firearms restrictions and exits from several markets (B); customs delays in Côte d’Ivoire (C); inspection and compliance burdens in export destinations (E)	“If there is political risk or instability, we don’t enter. We only go where it’s secure” (B01). “The world of weapons operates on trust” (B01)	Aligns with research identifying licensing restrictions, bureaucratic inefficiencies and institutional voids as recurring sources of political risk, often encouraging reliance on informal networks and intermediaries (Andrews & Luiz, 2024; Cuervo-Cazurra et al., 2018; Muradzada, 2025)
Economic shocks: Price spikes, exchange-rate pressures, cost increases and demand reallocation induced by geopolitical disruption	Export reallocation after Ukrainian supply-chain disruptions (A); opportunities from competitors’ shortages (E); and trade embargo-driven export channels (F)	“Our current challenge is to find a market for our product” (F01). “We need local partners who truly believe in the product and who are willing to understand and work it in the destination” (E01)	Echoes research showing that price volatility, demand shifts and geopolitical disruptions undermine predictive planning and favor flexible responses and market reprioritization (Cavusgil et al., 2021; Napier et al., 2024; Zhu & Sardana, 2020)

This empirical backdrop also helps explain the emergence of the four analytical dimensions discussed. As firms navigated overlapping shocks, they simultaneously (i) confronted the impacts and opportunities exploited by instability, (ii) developed mitigation strategies shaped by their perception of political risk, (iii) mobilized institutional support to overcome institutional barriers and (iv) relied on effectuation principles to sustain adaptive action under uncertainty. The following subsections examine these dimensions in greater detail, showing how Global South firms convert instability into strategic action through relational embeddedness, partner diversification, payment safeguards and rapid organizational reconfiguration.

Impact suffered versus exploited opportunities

Political risks simultaneously pose challenges and strategic openings, requiring adaptability in international operations. Organization A exemplifies this dynamic, as the 2021 political crisis in Haiti severely disrupted its sales channels, exposing vulnerabilities in high-risk markets. However, it leveraged reduced competition in Guinea-Bissau, where political instability discouraged other firms from entering the market, thus securing an advantageous position. Post-2022 disruptions to Ukraine’s dairy exports allowed Organization A to enter African markets previously served by European suppliers (Tarassevych, 2022; Scoones, 2024) and, together with Organization F’s post embargo wine exports to Russia (Andrews & Luiz, 2024; Zhu & Sardana, 2020; Yang et al., 2025), exemplify effectuation, as firms reframe shocks as opportunities and shift toward means based, non-predictive internationalization (Sarasvathy, 2008; Eduardsen & Marinova, 2020).

The ability to pivot depends on managerial practices that allow the rapid redeployment of attention and resources. In Organization A, managers reported that sales suspensions triggered immediate diversification into alternative regional markets, illustrating dynamic reconfiguration consistent with dynamic managerial capabilities (Vuorio & Torkkeli, 2023; Pitelis et al., 2024). Organization B, a firearms manufacturer, shows a similar pattern: as it navigated shifting regulatory regimes in Latin America and Africa, it relied on trust-based ties with local distributors to manage sudden trade restrictions. These cases suggest that Global South multinationals build resilience through localized partnerships and informal institutions that facilitate market access in politically unstable settings (Gammeltoft & Cuervo-Cazurra, 2021; Meyer & Li, 2022). Network embeddedness shaped not only where firms redirected their efforts, but also how they interpreted disruption: denser and more diversified ties helped them distinguish temporary shocks from strategic openings by providing weak signals, contextual knowledge and trusted counterparts for rapid adjustment (Pitelis et al., 2024; Cowden et al., 2024).

Rather than merely reallocating markets, political instability can also drive more complex forms of strategic innovation. For example, Organization C responded to acute logistical disruptions in West Africa, where port closures and labor shortages resulted from civil unrest, by engaging international institutions such as the United Nations to advocate for improved trade facilitation. This illustrates how firms in high-risk environments can proactively shape institutional frameworks to their advantage (Buckley et al., 2023). Organization D likewise exploited regulatory voids to access markets avoided by more established rivals. Together, these cases indicate that political instability enables competitive repositioning when firms leverage local networks and institutional resources (Pattnaik et al., 2021).

Ultimately, a crisis becomes an opportunity only when firms can deploy adaptive strategies and exploit institutional gaps (Felício & Figueira, 2022). Facing rising regulatory barriers in some markets, Organization E repositioned its products as alternatives to European ceramic exports, drawing on a relatively stable supply chain. This reflects the importance of institutional voids in shaping competition, especially in the Global South, where weak regulatory frameworks and fragmented governance structures are common (Andrews & Luiz, 2024; Luo & Tung, 2025). Likewise, Organization F’s entry into Asian and African wine markets after trade disputes shows how geopolitical shifts can reconfigure global supply chains and reward flexible internationalization strategies (Zhu & Sardana, 2020). When firms can mobilize trusted partners, home-country support or rapid capability reconfiguration, they are better able to turn disruption into a durable advantage (Andrews & Luiz, 2024; Napier et al., 2024). Together, these dynamics illustrate rapid reconfiguration and relocation routines, through which firms redeploy resources and market focus to convert political shocks into opportunities for repositioning and growth.

Political risk perception vs mitigation strategies

Perceived political risk varies across firms depending on their industry, operational model and embeddedness in relational networks. Organization B demonstrates a deliberate risk-avoidance posture: it confines operations to politically stable jurisdictions and delegates regulatory navigation to trusted intermediaries, thereby reducing exposure to volatile settings. The firm’s post-conflict withdrawal from Angola illustrates this logic (Reck & Fliaster, 2024). Moreover, research suggests that Global South MNEs, often constrained by weaker home-country institutions, rely on informal relationships to secure legitimacy in host countries (Pattnaik et al., 2021). Organization B’s approach underscores the importance of network-based risk mitigation, in which firms leverage relational embeddedness to gain regulatory insights and access strategic information otherwise unavailable in opaque institutional environments (Gammeltoft & Cuervo-Cazurra, 2021).

The empirical material also shows clear adaptive strategies. Organizations A and C relied on affordable-loss logics by limiting exposure through upfront payments or selective investments while experimenting with contingency-driven initiatives, such as humanitarian reconstruction and entry into alternative markets, consistent with effectuation’s bird-in-hand, affordable-loss and lemonade principles (Sarasvathy, 2008). Organizations D and F similarly combined rapid reallocation with rapid exploitation of openings, reflecting intrinsic speed capabilities and dynamic managerial response (Hawk et al., 2024; Vuorio & Torkkeli, 2023). When formal forecasting was infeasible, firms preserved optionality through quick reconfiguration, partner mobilization and selective commitments, constituting a practical form of non-predictive strategy (Napier et al., 2024; Pitelis et al., 2024). These mitigation strategies were often network-mediated: upfront payments, distributor referrals, local intermediaries and exploratory visits functioned as relational devices that reduced exposure while maintaining flexibility. Network embeddedness, therefore, shaped both the identification of adaptive strategies and what firms deemed feasible under uncertainty (Galkina & Jack, 2022; Alinasab et al., 2026).

The interplay between political risk perception and mitigation strategies highlights the need for adaptive resilience in internationalization (Napier et al., 2024). In contrast to predictive risk models, effectuation logic holds that firms operating in volatile markets should exploit available resources, build strategic alliances and maintain flexibility (Sarasvathy, 2024). Stakeholder collaboration helps convert uncertainty into a strategic advantage and underscores the importance of embedded networks for risk mitigation. Network mechanisms underpin both detection and mitigation of political risk: interviewees described partner networks as sources of market intelligence, logistical support and credit buffers − for example, Organization A’s longstanding distributors permit occasional credit extension; Organization E uses local agents to adapt communications and product presentation; and Organization B relies on distributor referrals to enter new territories. Relational embeddedness reduces the liability of foreignness, granting tacit knowledge, political capital (Cuervo-Cazurra et al., 2018; Gammeltoft & Cuervo-Cazurra, 2021; Meyer & Li, 2022) and diversified non-market portfolios strengthen MNE resilience via local information, political access and reputational buffers (Röell et al., 2022).

Institutional barriers vs institutional support

Institutional barriers, regulatory constraints, bureaucratic inefficiencies and weak infrastructure pose major obstacles for firms in politically volatile markets (Arikan & Shenkar, 2021). These challenges are especially acute in Global South markets, where institutional voids raise uncertainty and transaction costs (Meyer & Li, 2022). Organization E faced higher export costs in Kenya due to mandatory third-party inspections, while Organization C experienced supply chain disruptions in Somalia and Côte d’Ivoire because of inadequate port infrastructure and skilled labor shortages (Andrews & Luiz, 2024). Consistent with Pattnaik et al. (2021), these cases show how institutional fragility amplifies business risk for Global South firms. Organization D avoided markets with weak after-sales infrastructure, whereas Organizations C and E relied on home-market support, partner networks and institutional bricolage to sustain operations (Buckley et al., 2023; Muradzada, 2025). When formal institutions were unreliable, networks served as a substitute governance structure, providing local rules, reputational validation and coordination. This enabled firms to combine bricolage with effectual action rather than rely on predictive assessment alone (Napier et al., 2024; Pitelis et al., 2024).

Despite these challenges, institutional support mechanisms can play a crucial role in helping firms navigate complex regulatory environments and mitigate risks (Buckley et al., 2023; Meyer & Li, 2022). Organizations such as ApexBrasil facilitate market entry through trade fairs, fiscal incentives and strategic networking opportunities, enabling firms like Organizations A and F to expand their international presence. However, the scope of such support remains limited primarily to Latin American markets, constraining broader international expansion. This finding is consistent with prior research indicating that home-country institutional support is often instrumental in the initial phases of internationalization but must be complemented by host-country institutional frameworks for sustained success (Gammeltoft & Cuervo-Cazurra, 2021). Reliance on home-market institutional frameworks without adequate local adaptation often leads firms to encounter difficulties when navigating the regulatory landscapes of politically volatile regions (Li et al., 2021).

Evidence shows that firms operating in institutionally weak environments must adopt proactive strategies to navigate regulatory and infrastructural challenges (Scoones, 2024). Executives at Organization C reported severe customs delays in African markets that compelled reliance on informal networks and intermediary partners to sustain operations. Organization E similarly used supply-chain relationships to mitigate the impact of shifting trade restrictions, illustrating how firms embed themselves in adaptive institutional arrangements to preserve market presence. These findings support institutional bricolage theory, which posits that firms operating in institutional voids creatively recombine formal and informal mechanisms to address contextual constraints (Buckley et al., 2023). In this sense, our results also resonate with Eduardsen & Marinova (2020) argument that heightened political risk leads firms to privilege embedded, socially constructed heuristics over formal assessments. As Global South firms expand into politically volatile regions, their ability to balance home-country support, host-country adaptation and transnational engagement is critical to their long-term sustainability.

Effectuation-based responses to politically driven shocks

Our cases show how effectuation heuristics map onto firm practices in politically unstable host markets, with recurring shock patterns across the cases that were later grouped into distinct categories. Firms mobilized proximate means, such as financial reserves, trusted distributors and local contacts, to act immediately rather than wait for clearer forecasts, reflecting bird-in-hand logic and, in more volatile cases, pilot-in-the-plane logic (Sarasvathy, 2008). Payment safeguards and selective upfront terms indicate an affordable-loss orientation that preserves optionality while limiting downside exposure (Napier et al., 2024). Trust-based partnerships provided local legitimacy, tacit intelligence and logistical support often overlooked by formal forecasting (Gammeltoft & Cuervo-Cazurra, 2021; Zaefarian et al., 2023). Networks thus functioned as the relational infrastructure through which effectual principles became observable in practice, rather than as a separate analytical dimension (Galkina & Jack, 2022; Alinasab et al., 2026).

These mechanisms recur across cases: Organization A leveraged distributors to enter Guinea-Bissau, Organization E used local agents to adapt product presentation and Organization B limited expansion to politically stable jurisdictions supported by referral networks. Such patterns embody the crazy quilt principle, in which pre-commitments and partner co-creation reduce uncertainty and mobilize complementary resources amid political crises and institutional and regulatory shocks (Sarasvathy, 2008). Collectively, these practices create practical micro foundations that translate contingency prescriptions into repeatable routines for rapid response (Alsos et al., 2020; Packard & Bylund, 2021).

In several instances, firms reframed geopolitical, security and economic shocks as commercial opportunities by rapidly redeploying existing capabilities to underserved markets. Organization F redirected wine exports after European embargoes, while Organization A expanded into African markets following disruptions in Ukrainian dairy supplies (Zhu & Sardana, 2020; Tarassevych, 2022). Managerial narratives emphasize a pilot-in-the-plane stance in which tactical control, speed capabilities and institutional bricolage enable proactive agency under uncertainty and support rapid reconfiguration, selective withdrawal and market reprioritization (Cuervo-Cazurra et al., 2018; Hawk et al., 2024).

Taken together, the findings suggest that effectuation-based responses are best understood as a layered process in which political shocks reshape the field of action, effectual principles guide managerial responses and adaptive strategies enable firms to remain operational amid uncertainty. Networks matter throughout this process, not as substitutes for strategy, but as mechanisms through which trust, information and commitment become actionable when prediction is unreliable (Carney et al., 2016; Gammeltoft & Cuervo-Cazurra, 2021; Pitelis et al., 2024; Zaefarian et al., 2023). Table 5 synthesizes these patterns by linking the analytical axes, shock categories, effectuation principles and adaptive outcomes that firms mobilize under heightened uncertainty.

Table 5.
Empirical evidence mapped to effectuation principles

Analytical axis / bidirectional code	Political-driven shock categories	Relevant effectuation principles	Adaptive strategies and outcomes	Illustrative case evidence
Impact suffered vs exploited opportunities	Geopolitical and security shocks; Economic shocks	Bird-in-hand; Lemonade; Pilot-in-the-Plane; Affordable loss; Crazy quilt	Rapidly mobilize partners and resources; reroute supply and logistics; withdraw selectively and redeploy; monitor shifts and reprioritize markets; sustain continuity and resilience	A: suspended Haiti operations, entered Guinea-Bissau through distributor networks, and later reoriented to Africa after the Ukraine war; F: redirected wine exports after European trade restrictions opened new destinations
Political risk perception vs Mitigation strategy	Political crises	Affordable loss; Bird-in-hand; Crazy quilt; Lemonade	Set payment safeguards; commit incrementally; rely on trusted agents; preserve flexibility under instability; maintain engagement with limited downside	B: limited expansion to politically stable markets and relied on trusted distributors; A: used upfront payments and selective credit
Institutional barriers vs Institutional support	Institutional and regulatory shocks	Pilot-in-the-plane; Crazy quilt; Affordable loss; Bird-in-hand	Co-create with local stakeholders; adapt to regulatory gaps; use government programs and intermediary ties; build local embedding and resilience	C: handled customs delays through informal networks and UN collaboration; E: relied on supply-chain partnerships to manage regulatory and infrastructure constraints

These response patterns lead to outcomes associated with the gradual stabilization of firm action under political uncertainty, including operational continuity, organizational resilience, institutional legitimacy, local embedding and adaptive reconfiguration. Rather than eliminating political risk, firms preserve strategic viability by converting shocks into manageable adjustments, maintaining access to critical relationships and sustaining activity through repeated cycles of commitment and recalibration. Therefore, the evidence suggests that effectuation-based responses enable firms not only to absorb disruption but also to remain strategically engaged and adaptable as political conditions evolve.

Final considerations

This study investigates how Global South firms build and deploy institutional capabilities to operate amid political risk and armed instability (Napier et al., 2024). Based on evidence from six Brazilian firms across sectors and sizes, the study extends effectuation to political-risk settings, arguing that non-predictive, means-based reasoning fosters organizational resilience when forecasting fails (Sarasvathy, 2008; Pitelis et al., 2024). Empirically, firms relied on proximate resources such as financial buffers, trusted distributors and local contacts to respond quickly rather than wait for clearer signals, while payment safeguards and selective upfront terms reflected an affordable-loss logic that preserved strategic optionality. Trust-based partnerships also provided legitimacy, tacit intelligence and logistical support often overlooked by formal forecasting (Gammeltoft & Cuervo-Cazurra, 2021; Zaefarian et al., 2023). Together, these recurring practices constituted practical microfoundations for rapid response (Alsos et al., 2020; Packard & Bylund, 2021).

Empirical evidence suggests that effectual reasoning and adaptive strategies operate complementarily under political risk. Effectuation provides a means-based orientation when prediction is unreliable, while adaptive strategies enable targeted responses to politically driven disruptions (Sarasvathy, 2008; Pitelis et al., 2024). In this sense, effectuation provides the micro foundations for adaptive action amid fast-moving uncertainty (Alsos et al., 2020; Packard & Bylund, 2021; Napier et al., 2024).

The findings further indicate that network embeddedness and effectuation are mutually reinforcing. Networks provide local knowledge, trust and stakeholder commitments, while effectuation explains how these relational resources are mobilized and reconfigured as conditions evolve. Consequently, political risk management depends less on prediction than on transforming embedded relationships into adaptive action. This complementarity is particularly salient for Global South firms, whose exposure to institutional volatility often fosters improvizational capabilities and an “advantage of adversity” that favors effectual responses in fragile host markets (Ramamurti & Singh, 2009; Gammeltoft & Cuervo-Cazurra, 2021; Zaefarian et al., 2023).

Building on this complementarity, our findings suggest that political risk is not only a constraint but also an opportunity. Political instability reshapes firms’ available means, creating both limitations and low-competition openings that adaptive firms can exploit (Cuervo-Cazurra et al., 2018; Hawk et al., 2024). From an effectual perspective, such environments are spaces of both constraint and possibility (Gammeltoft & Cuervo-Cazurra, 2021; Sarasvathy, 2008). Managers who combine contingency awareness, means-driven experimentation and clear acceptable-loss criteria are more likely to transform disruption into strategic advantage (Pitelis et al., 2024; Napier et al., 2024).

Figure 1 shows how effectual principles strengthen organizational resilience and enable the exploitation of emergent opportunities under political risk. By juxtaposing political shocks, core effectuation heuristics, firm-level adaptive strategies and outcomes emerging from the integration of empirical evidence and the effectuation and non-predictive strategy literature, it outlines the causal logic of effectuation-based responses: means-based, non-predictive reasoning supports rapid partner mobilization, institutional embedding and operational continuity, explaining how Global South firms convert instability into resilient, opportunity-driven reconfiguration.

Figure 1.
Effectuation-based responses to politically driven shocks

Source: Prepared by the authors, based on Sarasvathy (2001, 2008); Alsos et al. (2020); Cuervo-Cazurra et al. (2018); DeGhetto (2024); Pitelis et al. (2024); Zhu & Sardana (2020); Meyer & Li (2022); and Yang et al. (2025)

From a practical standpoint, the findings suggest that managers of emerging multinationals and smaller exporters in fragile markets should cultivate diverse partnerships and strengthen local intermediaries, as these ties provide legitimacy, market intelligence and operational capacity beyond what predictive models can offer. Acceptable-loss rules, implemented through contractual clauses, payment safeguards or staged investments, help preserve strategic flexibility and limit downside exposure. Agility can also be enhanced through rapid relocation routines and logistics reconfiguration. Public policy and multilateral agencies can support these efforts through risk-mitigation instruments, internationalization programs and stronger intermediary networks.

This study has limitations that suggest avenues for future research. The small case sample limits generalizability and calls for comparative studies across Global South regions and sectors, as well as investigations into whether these findings extend to multinationals from developed economies. The durability and scalability of effectuation-based responses also warrant longitudinal and mixed-method research. Future studies should investigate whether nonpredictive routines become institutionalized over time and develop measures linking effectual reasoning to firm performance under political shocks. More broadly, conceptualizing resilience as a proactive, strategically mobilized capability can advance internationalization theory amid uncertainty while informing future empirical and policy research.

Funding:

This work and its authors were supported by the Brazilian National Council for Scientific and Technological Development (CNPq), Process 301548/2025-0, and by the Carlos Chagas Filho Foundation for Research Support of the State of Rio de Janeiro (FAPERJ), Process E-26/210.054/2025.

Data availability

The entire dataset supporting the findings of this study is available upon request from the corresponding author.

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Further reading

• ApexBrasil. (2024). Wines of Brazil. Agência Brasileira de Promoção de Exportações e Investimentos. Retrieved from Link to the cited article.
  » Link to the cited article.
• Bai, W., Wu, J., & Chetty, S. (2026). The impact of effectuation on international diversity and performance of SMEs. Journal of Business Research, 205, 115867, 10.1016/j.jbusres.2025.115867.
  » https://doi.org/10.1016/j.jbusres.2025.115867
• Yang, J., Askari, H., Forrer, J., & Teegen, H. (2004). U.S. economic sanctions: An empirical study. The International Trade Journal, 18(1), 23–62, 10.1080/08853900490277341.
  » https://doi.org/10.1080/08853900490277341

Appendix

Table A1.
Interview themes, summary of interview prompts and theoretical grounding

Interview themes	Summary of interview prompts	Theoretical grounding
Political instability impacts and market opportunities	“Were there situations in which political instability or armed conflict affected exports or operations in a host market?” “Did the company suspend, reduce, or redirect exports because of instability?” “Were there cases in which wars, sanctions, or supply shortages created commercial opportunities for the company?”	Acemoglu and Robinson (2023); Meyer and Li (2022); Dai et al. (2023); Yang et al. (2025); Napier et al. (2024); Pidduck et al. (2024)
Political risk mitigation through networks and partnerships	“Did the company expand internationally through distributors, representatives, traders, or subsidiaries?” “Did local partners help the company navigate political uncertainty?” “How did fairs, trade missions, or institutional contacts contribute to international expansion?”	Carney et al. (2016); Gammeltoft and Cuervo-Cazurra (2021); Pattnaik et al. (2021); Röell et al. (2022); Reck & Fliaster (2024); Pitelis et al. (2024); Galkina & Jack (2022)
Institutional barriers and adaptive responses	“What regulatory, customs, or logistical barriers did the company encounter in foreign markets?” “How did the company adapt operationally after abrupt changes?”	Cuervo-Cazurra et al. (2018); Qian & Qiu (2023); Andrews & Luiz (2024); Muradzada (2025); Cowden et al. (2024); Scoones (2024)
Non-predictive strategies and effectuation under uncertainty	“How did the company make decisions when future market conditions were difficult to predict?” “Did the company rely on existing partners or previously accumulated experience to respond to instability?” “Were there cases in which previous experience in volatile markets helped shape subsequent business decisions?”	Sarasvathy (2001, 2008); Alsos et al. (2020); Wiltbank et al. (2006); Galkina & Jack (2022); Alinasab et al. (2026); Napier et al. (2024); Pitelis et al. (2024); Li et al. (2021); Luo & Tung (2025)

*

Lucas Baesso can be contacted at: E-mail: [e-mail]

ASSOCIATE EDITOR:

Cristina Isabel Fernandes

Publication Dates

• Publication in this collection
  12 Oct 2026
• Date of issue
  2026

History

• Received
  20 Feb 2025
• Reviewed
  15 Oct 2025
• Reviewed
  09 Mar 2026
• Reviewed
  28 Apr 2026
• Reviewed
  19 June 2026
• Accepted
  19 June 2026