DIALECTIC OF EXTERNALIZATION AND INTERNALIZATION OF INTERNATIONAL PRODUCTION

This article examines the dialectical interplay between internalization and externalization within the framework of international business theory, emphasizing the evolving configuration of multinational enterprises (MNEs) in response to globalization, digital transformation, and increasing systemic complexity. The study analyzes the theoretical evolution of internalization theory, extending its conceptual boundaries by incorporating contemporary developments such as digital platforms, the proliferation of knowledge-intensive assets, and the institutional embeddedness of global value chains. The theory of externalization emerged as a development of the theory of internalization, as the rapid formation of new international enterprises required rapid entry into new markets in conditions of limited resources and financial base. However, this did not negate the importance of internal processes, but rather complemented the mechanisms for overcoming market instability and stimulated the emergence of hybrid forms that combine both theories at different stages of international activity. Special attention is devoted to the emergence of hybrid organizational structures that transcend the traditional dichotomy between markets and hierarchies. These include outsourcing, subcontracting, strategic alliances, and network-based governance mechanisms, which collectively redefine the strategic logic of global business operations. The concept of the “global factory” is explored as a paradigmatic model of modern MNE configuration, reflecting a dynamic balance between internal control and external coordination. The paper conducts a comparative analysis of key determinants influencing the choice between internalization and externalization, including asset specificity, technological complexity, risk of opportunism, intellectual property protection, and the quality of institutional frameworks. The findings suggest that contemporary MNEs increasingly adopt ambidextrous strategies that selectively integrate both organizational forms in accordance with market conditions, product characteristics, and stages of international expansion. The article concludes by identifying promising avenues for further research on externalization as a critical driver of efficiency, adaptability, and innovation in the evolving architecture of the global economy.