Williamson's Transaction Cost Economics Research Articles

Corporate social responsibility and sustainability: insights from Boulding and Luhmann

The modern discourse on corporate social responsibility is framed by ideas many of which have important parallels in the literature on the general and social systems theory. Particularly the conceptions of the interdependence between business and society, and of the societal embeddedness of business, revolve around the theme of system–environment interaction that is potentially unsustainable. The paper draws upon the systems-theoretic arguments of Luhmann and Boulding in order to explain how sustainability is enhanced by corporate social responsibility practices. Systems are shown to risk becoming unsustainable if they develop their complexity to the point of overstraining the carrying capacity of the environment. To forestall this scenario, systems can improve their sensitivity to the environment and constrain their own complexity. These sustainability strategies reveal the systems-theoretic meaning of corporate social responsibility. Explained in this way, corporate social responsibility turns out to be a functional equivalent of vertical integration seen from the perspective of Williamson's transaction cost economics.

Ordre public versus ordre privé

Résumé Peu de travaux académiques se sont intéressés à la place centrale que Williamson accorde au droit dans sa théorisation. Cet article propose d’y remédier en offrant une relecture critique de l’approche law and economics de Williamson à partir de l’étude des relations collectives de travail aux États-Unis. Pour Williamson, le droit fixe, d’un point de vue positif, les « règles du jeu » (ordre public), les individus négociant ensuite librement des règles qui constituent les institutions de la gouvernance (ordre privé), et, d’un point de vue normatif, cette partition est optimale, compte tenu de la logique de l’ economizing propre aux individus. Or, nous montrons qu’en réalité le droit américain des relations de travail relève du « pluralisme juridique » et que le modèle de l’ordre privé, remis en cause depuis une trentaine d’années, contient de nombreuses limites. Dans ces conditions, l’analyse du schéma ordre public/ordre privé que Williamson propose ne semble plus guère pertinente.

Compassion: The Missing Link in Economics and Management

Most business philosophies are based on economic theories, particularly rational behavior and optimum decision making. This leads companies to focus on profit maximization often ignoring other important aspects. As a result we have witnessed incidents such as the recent global recession. In this article we review the mainstream economic theories as they are applied in the business environment, focusing particularly on Oliver E. Williamson's transaction cost economics (TCE). We propose that “compassion” is a missing link in these theories connecting economics with management.

Vietnam's state‐owned enterprise reform

PurposeUnder the pressure of competition from non‐state‐owned enterprises (non‐SOEs) since the Renovation in 1986, the Government of Vietnam has sought to reform state‐owned enterprises (SOEs) in order to improve their productivity and efficiency. Whilst the theoretical efficiency benefits from the SOE reform have interested many, this study seeks to add empirical insights to this debate using Williamson's transaction cost economics (TCE).Design/methodology/approachOrganizational integration and transaction costs – two dimensions of firm efficiency – were compared between SOEs and non‐SOEs using multivariate analyses of variance (MANOVA). The analysis was conducted in the context of the within‐firm logistics processes of international multimodal transport (IMT) in Vietnam.FindingsSOEs were as efficient as non‐SOEs along organizational integration and transaction costs dimensions.Research limitations/implicationsResults of the study contribute to the ongoing research on SOEs reform in Vietnam. They add tentative support to the reform process, although the study also highlights the need for further research incorporating the wider motivation for the SOE reform and/or the broader influence of competition and private ownership.Originality/valueThis study assesses the efficiency of the SOE reform in Vietnam from a perspective that has never been done before, Williamson's TCE.

The close relation between organization theory and Oliver Williamson's transaction cost economics: a theory of the firm perspective

Abstract:This article deals with the contribution of organization theory to transaction cost economics from an examination of Williamson's theory of the firm. Borrowing and applying some conclusions of organization theory, Williamson rightly differs from other theories of the firm, particularly in his analysis of hierarchical authority, intra-firm conflicts, organizational atmosphere, and the farsighted contracting. Having shed light on the complementary and divergent thoughts of these two different disciplinary approaches to the firm, the article recalls Williamson's project of building a ‘science of organization’.

A Tribute to Oliver Williamson: Regulation: A Transaction Cost Perspective

This essay explores the immense impact of Oliver Williamson's writings and thoughts on contracting and organizations to research on the economics of regulation. Based on Williamson's transaction cost economics approach, this essay discusses the fundamental hazards inherent in government/utility-investors' interactions and explores how these hazards affect the way regulation is developed and the institutional environment within which these interactions take place.

The Corporation: A Reality or a Fiction?

The debate about whether society, the corporation and any other type of universal has a reality outside of the mind is an old one. Catholic Social Thought (CST) sees the corporation as a community of persons. It has an existence (a life and ability to operate) of its own and is oriented to the good of its participants. This view is contrasted with the nexus of contracts approach, Williamson's Transaction Cost Economics approach and some types of stakeholder theory. It is contended that CST's approach is more realistic.

Assessing the potential of new institutional economics to explain institutional change: the case of road management liberalization in the Nordic countries

Like other network industries, construction and maintenance of transport infrastructure have also seen a recent trend towards liberalization, deregulation, re-regulation, and sometimes privatization. With respect to institutional arrangements, this change implies that previously vertically integrated state-owned enterprises have been replaced by ‘more market’, meaning private ownership and contracts together with regulation by an independent government agency. When economists discuss institutions, this is preferably done in terms of efficiency and equilibrium. We discuss Williamson's Transaction Cost Economics (TCE) and Aoki's Comparative Institutional Analysis (CIA) as being two representative approaches of New Institutional Economics in which efficiency and equilibrium are central. What is the applicability of these two approaches to explain institutional change? The case of road management in Nordic countries provides the empirical evidence. We will draw conclusions as to the strengths and weaknesses of the two approaches and add suggestions to complement the efficiency approach, which allow for a more detailed level of analysis, in which also issues of political power are included.

The rhetoric of Oliver Williamson's transaction cost economics

Bounded rationality, opportunism, the primacy of markets and the action of economizing are building blocks of Oliver Williamson's Transaction Cost Economics (TCE). As in all intellectual exchanges, Williamson has used a range of argumentative devices to set up and negotiate his basic notions and assumptions with economists. Rhetorical analysis is applied here to study his argumentation in a certain institutional context within economics. Negotiations with the mainstream, with the competence view of the firm and within the New Institutional Economics, for instance, have had an impact on the construction of TCE and are given attention here. Difficult decisions have been made in order to forge ahead with TCE, including whether to uphold some notions (e.g. opportunism) at the cost of leaving others behind (e.g. economics of atmosphere). Rhetorical transactions like this have shaped TCE and its recognition in economics and related areas.

Market position, resource profile, and governance: linking Porter and Williamson in the context of international courier and small package services in Japan

AbstractTwo economic theories that have had an immense impact on modern strategic management research are Porter's strategic positioning framework (SPF) and Williamson's transaction cost economics (TCE). While both theories have contributed to our understanding of strategic management and to the choice of strategy and structure, each theory offers managerial prescriptions that are incomplete at best. We contend that if followed in isolation, each theory can lead to inferior performance. This paper, which studies the international courier and small package (IC&SP) services in Japan, improves upon prescriptions from both theories by linking Porter's and Williamson's approaches. Our main proposition is contained in three relationships that predict a fit among three strategic choices: market position, resource profile, and organizational structure. We test our predictions with a three‐stage, reduced‐form, endogenous self‐selection model. While our empirical methodology is complicated and relies on a multilevel analysis, the methodology is necessary both for analyzing a constellation of activities in the vertical chain and for assessing strategy, structure, and performance when data can be drawn from only a limited number of firms. Our results suggest that a firm's market position, resource profile, and organizational choice are related in ways predicted by a positioning‐economizing perspective. To be sure, our study is ambitious and suffers from a number of limitations; nevertheless, it provides one of the first attempts to theoretically and empirically link Porter's SPF and Williamson's TCE. Copyright © 2001 John Wiley & Sons, Ltd.

Technology and Oliver Williamson's transaction cost economics

Oliver Williamson has greatly contributed to refining neoclassical economics by incorporating transaction costs and internal organization; yet, his new institutional economics too easily dismisses the role of technology. In doing so, he has replaced the determinism of technological production efficiencies with the determinism of transaction cost efficiencies. A review shows that Williamson's new institutionalism has evolved through three stages in terms of the focus of his analysis and his views of transactions. Throughout this evolution, however, his proposed solutions to organizational failures have actually continued to rely heavily upon technology.

The Literature of Economics: The Case of Berle and Means

THERE are not many books fifty years old whose central argument is identified for modern economists simply by naming the work, but Berle and Means's The Modern Corporation and Private Property is surely one. Every schoolboy, as Macaulay would say, knows that they discovered or asserted or proved or were otherwise joined to the proposition that ownership and control have been separated in the large corporation. Moreover this separation had large, but not easily recalled, effects on the conduct of corporate enterprise. This essay will examine the reception of this book, particularly by the economics profession, in its first decade. Our interest will be not so much in the novelty or validity of the book's message as in how it was understood and received. The process by which a proposition of great potential scientific and political significance gets established in a discipline is fascinatingly mysterious. Our investigation will support the view that doctrines and theories congenial to an intellectual milieu are accepted quickly and widely, although not necessarily as uncritically as the work of Berle and Means was accepted.