Thucydides Trap in the Business World: Corporate Strategy for a New Geopolitical Reality

Abstract

When a rising power threatens the position of an incumbent power, historically the result has been war. This conjecture derived from the analysis of the Peloponnesian War by Greek historian Thucydides (460-400 BC) has borne out up to modern times. Statistically, three out of four such situations ended in war according to Graham Allison who has characterized observations of this type of conflict and their underlying dynamics as Thucydides’ Trap. This concept is of primary relevance today for policymakers worldwide, as China and the United States intensify their rivalry. In the present paper, we extend Thucydides’ Trap to the world of business. First, we explain that the underlying dynamics of the trap are at play in the business world as well. Rising companies constantly threaten the position of incumbent market leaders. Unlike politicians, however, managers have several strategic options to avoid falling into Thucydides’ Trap. Nevertheless, this changes in the new geopolitical landscape which is characterized by the Sino-American rivalry as well as intensified nationalism and de-globalization. We point out how the managerial strategy space is narrowed by a new geopolitical reality: aggressive corporate responses are more likely in world dominated by two superpowers caught in Thucydides’ Trap. We discuss the implications of this new contextual reality for the strategy of multinational firms.