What happens when the engine cannot find a variable in the scope chain?

The linked list of lexical environments that the engine walks to resolve a variable. It looks in the current environment first, then follows outer references up to the global scope. If not found, it throws ReferenceError.

At definition time. The outer references are determined by where functions are written (lexical scope), not where they are called. This is why a function called from a different scope does not gain access to that scope's variables.

A local variable with the same name as an outer one shadows the outer. The engine finds the local first and stops searching, so the outer variable is hidden but not affected.