Artificial intelligence and strategic resilience in international business: a new theory of multinational adaptation to geopolitical shocks

Purpose This study aims to develop a new theoretical framework to explain how geopolitical disintegration in the Middle East and Red Sea region generates transregional shocks that disrupt multinational enterprises (MNEs) and how artificial intelligence (AI) capabilities enhance firm-level strategic resilience. Design/methodology/approach This study introduces the transregional shock transmission (TST) theory and uses a multi-method quantitative design. It integrates panel data from 75 MNEs in the logistics, energy and shipping sectors with event-based conflict data and machine-coded news sentiment analysis for 2013–2024. A moderated mediation model is tested using structural equation modeling to examine the relationships between geopolitical instability, risk perception, strategic adaptation and AI capabilities. Findings Firms with advanced AI-driven risk intelligence systems demonstrate significantly higher resilience to geopolitical shocks. These firms adapt supply chains more rapidly, mitigate financial losses and restore operations more efficiently. AI capability moderates the adverse effects of geopolitical disintegration by enhancing real-time risk perception and adaptive decision-making. Research limitations/implications This study is limited by its cross-sectional design and reliance on self-reported data, which may constrain causal inference and introduce bias. Although the sample is diverse, generalizability remains limited. Future research should adopt longitudinal and multi-source approaches and further validate emerging constructs to deepen the understanding of leadership and ethical accountability in AI-mediated contexts. Practical implications Theoretically, this study extends crisis internationalization and geopolitical risk research by positioning AI as a dynamic capability shaping firm responses to regional instability. Practically, the findings suggest that MNEs should: invest in AI-enabled early warning and predictive analytics systems; integrate geopolitical risk metrics into strategic planning; decentralize critical supply chain nodes; and shift from reactive to proactive resilience models in fragile environments. Originality/value This paper advances a novel conceptual model, TST theory, that explains how localized political instability translates into global business disruption. By highlighting the strategic role of AI in navigating transregional shocks, it offers new insights into adaptive international business strategy amid escalating geopolitical fragmentation.