Yun Hou

The Hong Kong University of Science and Technology (Guangzhou)

Geopolitical tensions are increasingly reshaping global markets by altering competitive dynamics in the host country. This study investigates how domestic firms and non-targeted multinational enterprises (MNEs) respond to market voids created when geopolitical tensions target specific foreign firms. Theoretically, we argue that geopolitical tensions generate host country sentiments that shift competition from primarily being capability-driven to sentiment-based, giving domestic firms a competitive edge over other foreign entities in filling market voids. Using the 2017 THAAD crisis—a quasi-experiment disrupting South Korean-dominated cosmetics markets in China—we found that Chinese domestic firms introduced significantly more new products post-THAAD compared to both targeted South Korean and non-targeted foreign rivals. However, this effect was weaker for domestic firms with foreign investments or more local market experience. By highlighting the role of sentiment-driven competition, this study advances our understanding of how geopolitical tensions reshape competitive dynamics beyond traditional market factors.

Prof. Yun Hou is an Assistant Professor at the Information and Policy for Entrepreneurship (IPE) Thrust at HKUST(GZ). She received her Ph.D. in Management from the National University of Singapore and holds degrees in Economics and Management from Peking University. Her research focuses on innovation, entrepreneurship, and technology strategy. Her recent research examines how institutional environments (patent law, geopolitical tensions, and environmental regulations) affect innovation using quasi-experimental methods, and how entrepreneurs adjust to bias in experimental settings.