The Economics of Organization: The Transaction Cost Approach

1981/11/01 by Oliver E. Williamson · 6,399 citations
Business, Management and Accounting · #Accounting and Organizational Management #Business #Business Strategy and Innovation #Computer science #Corporate Finance and Governance #Corporate governance #Database #Database transaction #Economics #Finance #Industrial organization #Microeconomics #Organizational economics #Transaction cost #Unit (ring theory)

paper · doi:10.1086/227496

published in American Journal of Sociology 87(3), 548-577 (University of Chicago Press)

openalex publication_date 1981/11/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/04

Abstract

The transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations. Applications of this approach require that transactions be dimensionalized and that alternative governance structures be described. Economizing is accomplished by assigning transactions to governance structures in a discriminating way. The approach applies both to the determination of efficient boundaries, as between firms and markets, and to the organization of internal transactions, including the design of employment relations. The approach is compared and contrasted with selected parts of the organization theory literature.

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