Transaction-Cost Economics Essay

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P re p a re d f o r S c a n d in a v ia n J o u r n a l o f E c o n o m ic s . C o m m e n ts w e lc o m e . Transaction-Cost Economics: P a st, P resen t, a n d F u tu re? Robert Gibbons* M IT a n d N B E R April 13, 2010 Abstract Oliver Williamson is the founder and chief developer of transaction-cost economics (TCE). In this brief essay, on the occasion of his Nobel Memorial Prize, I offer a partial discussion of Williamson’s contributions by first summarizing some of the accomplishments of TCE-past and then sketching some of the opportunities for TCE-future. Most of the topics in both sections (TCE-past and TCE-future) start with a quotation from Williamson’s early work that I think still speaks volumes today. That is, while fellow travelers and successors have acted on one set of Williamson’s insights, helping to produce the accomplishments of TCE-past, another collection of Williamson’s insights has gone relatively unremarked, creating some of the opportunities for TCE-future. Keywords: Oliver Williamson, Nobel, transaction costs, boundary of the firm JEL codes: D23, L22, L24 * I a m v e ry g ra te f u l to R ic h a rd H o ld e n , J o n L e v in , H o n g y i L i, S c o tt M a s te n , M ik e P o w e ll, J o h n R o b e rts , S c o tt S te rn , S te v e T a d e lis , T o m m y W a n g , a n d B irg e r W e rn e rf e lt f o r h e lp f u l c o m m e n ts , a s w e ll a s to th e P ro g ra m o n In n o v a tio n in M a rk e ts a n d O rg a n iz a tio n s a t M IT ’s S lo a n S c h o o l f o r f in a n c ia l s u p p o rt. Transaction-Cost Economics: P a st, P resen t, a n d F u tu re? by Robert Gibbons 1. Introduction In 2009, Oliver Williamson shared the Nobel Memorial Prize in Economics Sciences “for his analysis of economic governance, especially the boundaries of the firm.” More generally,
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