A general framework of digitization risks in international business

Abstract

Digital global connectivity offers multinational enterprises new opportunities, but it also brings unique risks, an area not yet well examined in international business. This article presents an organizational information-processing framework, which elucidates what (risk types and sources), how (risk assessing and managing), and whom (vulnerable firms) these risks relate to, in a dialectical manner that seeks to combine theoretical insights and managerial actions. We focus on three types of risks (digital interdependence, information security, and regulatory complexity) that MNEs uniquely face, and explain within-country and cross-country risk drivers. We document variances among MNEs in exposure to these risks, proposing that information flow intensity, geographic diversity, international strategy, and global platform participation carry strong implications on the firm’s risk exposure and response. Finally, this framework offers actions essential for MNEs, individually and collectively, to manage digital risks, emphasizing processes of building and deploying digital intelligence in pursuit of transnational resilience for cross-border activities that become increasingly digitally connected.