Geoeconomics and power: Implications for boardroom decision-making

This article is part of the Newsletter #26 of the Esade Center for Corporate Governance. Subscribe here.   

In 2010, Pulitzer Prize–winning American diplomat and New York Times correspondent Leslie H. Gelb remarked that “most nations today beat the drums of their foreign policy largely to economic rhythms.” In hindsight, his words proved prescient: in recent years, economic power has ceased to be a mere reflection of political power and instead become its principal tool. 

In a context where economic influence is progressively replacing military might as the preferred instrument of power, geoeconomics—the use of economic tools to achieve geopolitical goals—has become essential to understanding the strategic challenges faced by global firms. 

For businesses, risk and opportunity are no longer defined solely by the market, but increasingly by geopolitics

In 1990, Edward Luttwak began using the term “geoeconomics” to describe how states were shifting from military instruments to economic ones (such as tariffs or sanctions) to gain greater leverage in the global order. For Luttwak, this transformation did not signal a decline in the intensity of competition, but rather a change in its form: “the projection on the world scene of the ambitions of businessmen and technologists, just as war and diplomacy once reflected aristocratic ambitions.” This view places economics at the heart of international strategy and positions businesses as both agents and, at times, instruments of geopolitical power. Unlike soft power, geoeconomics is not primarily concerned with attracting or persuading, but rather with imposing, constraining, or limiting others through economic means. 

For companies, this means operating in an environment where risk and opportunity are shaped not only by market forces, but by geopolitical dynamics. The recent escalation of US export controls on advanced semiconductors to China, or the mounting regulatory pressure on tech firms in Europe driven by digital sovereignty concerns, are clear examples of how state actions are redrawing the competitive landscape. Similarly, the war in Ukraine has significantly disrupted global supply chains for critical raw materials such as gas, wheat, and industrial metals, forcing many European firms to rethink their sourcing and production strategies. Geoeconomics, in this sense, is not an academic abstraction—it is a tangible reality that affects entire industries, strategic alliances, and investment decisions. 

Geoeconomic tools and actors 

Geoeconomics operates through a range of instruments that may appear economic in nature but are clearly strategic in intent. States and regional blocs deploy sanctions (such as those imposed by the EU and US on Russia following the 2022 invasion of Ukraine), subsidies (for example, the US Inflation Reduction Act of 2022, which supports clean technologies), export controls (like the 2024 US restrictions on advanced chip sales to China), targeted investments (such as China’s investments in critical infrastructure across Africa and Southeast Asia), and industrial policies (like the EU’s 2023 Green Deal Industrial Plan) to shape the international environment in line with their interests. These tools allow governments to exert pressure, influence behavior, or shield critical or strategic sectors—without resorting to direct force. 

The transformation of global power architecture has given rise to new alliances and rivalries

The classical model of the Westphalian nation-state combined with open market economies has given way to a more complex and fragmented configuration. In this new landscape, new actors have emerged with growing weight in international affairs—notably geoeconomic blocs and large multinational corporations, which now play a decisive role in setting the rules of the global game. 

This shift in the global power architecture has generated new patterns of alliance and rivalry, centered on geoeconomic blocs that compete—and sometimes cooperate—for influence, resource access, and control over strategic technologies. Within this framework, four broad blocs can be identified: 

• The Western bloc, led by the United States and the European Union, promotes a liberal vision of international trade, increasingly shaped by concerns about economic security, technological autonomy, and sustainability. This bloc has stepped up coordination in areas such as sanctions, digital regulation, and industrial subsidies. Its military cooperation is reflected in NATO and the 2021 AUKUS agreement.
• The alternative bloc, comprising China, Russia, and Iran, shares a common agenda of challenging the Western liberal order. This group collaborates under the umbrella of BRICS+, which expanded in 2024 to include Iran, Saudi Arabia, the United Arab Emirates, Ethiopia, and Egypt.
• Non-aligned countries, such as India, Turkey, Indonesia, or Brazil, seek to maintain strategic autonomy by balancing relations and maximizing benefits without becoming overly dependent on any bloc.
• The Global South, which includes emerging and developing economies with diverse interests, structural vulnerabilities, and an increasing demand for a voice in multilateral forums. 

Large technology companies have also emerged as heavyweight geoeconomic players. They control digital infrastructure, data, algorithms, and communication platforms, endowing them with structural power. Figures such as Elon Musk, Mark Zuckerberg, and Sundar Pichai participate in decisions with geopolitical consequences. Moreover, the app economy has consolidated platforms (such as TikTok, X, Meta, and Amazon) as new forms of critical infrastructure that shape narratives, influence behavior, and pose strategic challenges. 

What should boards of directors consider in today’s geoeconomic landscape? 

In a global environment defined by fragmentation, strategic rivalry, and the instrumentalization of economic power, corporate boards can no longer afford to overlook the geoeconomic dimension. Exposure to regulatory, technological, or logistical risks is no longer a remote possibility—it is an operational reality affecting sectors such as energy, automotive, technology, and food. 

Incorporating geoeconomics into the board agenda involves: 

• Building strategic intelligence capabilities
• Anticipating disruptive scenarios
• Asking key questions:
  • Where do our main geoeconomic risks lie?
  • How dependent are we on sensitive suppliers, technologies, or markets?
  • Are we ready to respond swiftly to regulatory changes or trade restrictions?
  • Do we have the right profiles and expertise on the board to understand these dynamics? 

Corporate governance must evolve toward a more systemic and forward-looking perspective. Business resilience now depends, in part, on the ability to interpret the world strategically. Geoeconomics has become a structural factor shaping the sustainability, competitiveness, and legitimacy of corporate decisions.