When a rising power in the international system threatens the position of an incumbent power, the outcome has historically been conflict, mostly in the form of outright war. This conjecture known as Thucydides Trap was popularized by Graham Allison and might be applicable today to the China-U.S. bilateral relationship which has become a rivalrous or even adversarial. In the present paper, we extend Thucydides’ Trap to the world of business practice. First, we depart from geopolitics altogether and expound how the underlying dominance dynamics of the trap are at play in the business world. Rising companies constantly threaten the position of incumbent market leaders. Unlike political leaders, however, managers have several strategic options to avoid falling into Thucydides’ Trap. In a second section, we bring back the new geopolitical landscape characterized by the Sino-American rivalry as well as intensified nationalism and de-globalization. We examine how the managerial strategy space is narrowed by the geopolitical reality. Aggressive corporate responses, where business interests align with the state are more likely in world dominated by two superpowers caught in Thucydides’ Trap. We discuss the implications of this new contextual reality for strategy formulation and implementation of global firms and international business.
China, Geopolitics, Strategy, Thucydides Trap, U.S.A.