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Bad for Practice: A Critique of the Transaction Cost Theory
Abstract
Transaction cost economics (TCE), and more specifically the version of TCE that has been developed by Oliver Williamson (1975, 1985, 1993b), has become an increasingly important anchor for the analysis of a wide range of strategic and organizational issues of considerable importance to firms. As argued by some of its key proponents, the theory aims not only to explain but also to influence practice (Masten, 1993). In this article, we argue that prescriptions drawn from this theory are likely to be not only wrong but also dangerous for corporate managers because of the assumptions and logic on which it is grounded. Organizations are not mere substitutes for structuring efficient transactions when markets fail; they possess unique advantages for governing certain kinds of economic activities through a logic that is very different from that of a market. TCE is “bad for practice” because it fails to recognize this difference. We identify some of the sources of the “organizational advantage” and argue for the ...
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Cites
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Cited by
Toward a knowledge-based theory of the firm
Grant, R. M. (1996) · Strategic Management Journal · doi:10.1002/smj.4250171110 · Cited by 16,157
A Resource-Based Theory of the Firm: Knowledge Versus Opportunism
Conner, K. R., & Prahalad, C. K. (1996) · Organization Science · doi:10.1287/orsc.7.5.477 · Cited by 3,146
Organizational Silence: A Barrier to Change and Development in a Pluralistic World
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Theory and research in strategic management: Swings of a pendulum
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Metadata
- Authors
- Ghoshal, S., & Moran, P.
- Venue
- Academy of Management Review
- Publisher
- Academy of Management
- Published
- 1996-01-01
- Volume
- 21
- Issue
- 1
- Pages
- 13-47
- ISSN
- 0363-7425 (ISSN-L)
- OpenAlex
- W2021840847
- Cited by
- 1,927
- References
- 8
- FWCI
- 78.74
- Type
- journal article
- Language
- en
- Open access
- closed
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