Orchestration Theory of the Multinational Enterprise in Digital Platform and AI Ecosystems

Abstract

The emergence of digital platforms, business ecosystems, and artificial intelligence (AI) is transforming the nature of multinational enterprise (MNE) activity and challenging established theories of international business. While internalization theory has provided a powerful explanation for the existence and boundaries of the MNE through its focus on market imperfections, transaction costs, and governance choices, its explanatory power is increasingly constrained in environments characterized by ecosystem-based value creation, distributed innovation, and technologically mediated forms of control. Building on earlier work by Pitelis and Teece, this paper advances orchestration theory as a broader framework for understanding the contemporary MNE. We argue that modern MNEs are best viewed not simply as organizations that internalize transactions, but as focal firms that orchestrate globally distributed systems of resources, capabilities, partners, and complementary assets. Orchestration encompasses the creation, co-creation, and capture of value through the deployment of dynamic capabilities and the management of complementarities and co-dependencies across organizational and national boundaries. The digital platform and AI era further reinforces the importance of orchestration as control increasingly derives from technological architectures, data flows, ecosystem positioning, and access to critical complementary assets rather than ownership alone. By integrating insights from internalization theory, dynamic capabilities, and ecosystem research, the paper proposes a reconceptualization of the MNE that better reflects the realities of contemporary international business and provides a foundation for future theoretical development.