Organizing the Modern Firm in the Worldwide Market for Market Transactions

To represent the modern world economy, we introduce the worldwide market for market transactions concept to enable us to model the organization of the firm. Outsourcing and offshoring are changing the nature of the firm, presenting internalization/externalization decisions for international managers, and producing unprecedented international relocation of economic activity. We engage with Williamson's (1996) challenge to address 'which transactions go where and why?' to explain the outsourcing-offshoring phenomenon. We offer a novel modelling approach to represent a firm of any scale and scope in this modern world economy. Propositions that frame our modelling approach are offered. We conclude that foreign involvement alongside foreign investment shapes the scale and scope of the firm as the internationalization of productive capabilities, coordinated through the worldwide market for market transactions, redefines the modern world economy.