Joel Baum, University of Toronto

Outsourcing War: The Rise of Private Military Companies after the Cold War

Joel A.C. Baum and Anita M. McGahan
Rotman School of Management, University of Toronto

In his final speech as US president, Eisenhower expressed concern that the military could lose command-and-control decisions to a civilian ‘scientific and technological elite.’ In this paper, we argue that these decisions are governed in part by private military corporations (PMCs), a hybrid form of organization operating under a distinctive economic logic (Williamson 1991). We uncover this logic by chronicling the development of PMCs since the Cold War, arguing that the hybrid form was shaped by environmental and institutional developments. Our analysis points to the need for a dynamic transaction cost theory to understand how markets, hierarchies and hybrids emerge.