https://npmjs.org/doc/folders.htmlStarting at the $PWD, npm will walk up the folder tree checking for a folder that contains either a package.json file, or a node_modules folder. If such a thing is found, then that is treated as the effective "current directory" for the purpose of running npm commands. (This behavior is inspired by and similar to git's .git-folder seeking logic when running git commands in a working dir.)
If no package root is found, then the current folder is used.