This study examines how a third-party country’s political alignment amid intensifying geopolitical rivalries impacts corporate performance. Drawing on a constructivist perspective in international relations, we argue that political alignment is shaped by socially constructed identities, not just material considerations. Based on resource dependence theory, we suggest that a third-party country’s alignment with one rival country negatively affects the performance of firms that rely heavily on the other rival country’s market. Furthermore, we argue that firms can reduce such negative effects through effective nonmarket strategies. Leveraging South Korea’s 2022 presidential election—a closely contested event resulting in a pro-U.S. foreign policy shift—as a quasi-natural experiment, we find that firms with higher dependence on the Chinese market experienced negative stock market reactions. However, firms that appointed politically connected board members or built social capital through stakeholder management mitigated these negative impacts. Such firms are perceived as more resilient due to their ability to navigate geopolitical uncertainty and maintain favorable relationships with key stakeholders, including the home country governments.
