Transaction cost economics

Brian S. Silverman

Chapter 6 in A Guide to Key Theories for Strategic Management, 2026, pp 98-116 from Edward Elgar Publishing

Abstract: Transaction cost economics (TCE) has been a core theory in strategic management for more than 40 years. The theory provides strong predictions regarding effective governance of economic transactions – notably, the appropriate boundaries of the firm, circumstances in which alliances are a preferred organizational form, and proper within-firm organization of divisions and functions. This chapter outlines TCE's theoretical foundations, starting with its underlying behavioral assumptions and building to its main predictions for governance, performance, and organizational change. The chapter also discusses a subset of the huge volume of empirical evidence that is consistent with the theory. Finally, it discusses TCE's relationship to other theories of strategic management, highlighting key complementarities and conflicts, and proposes possible paths for future research that can take advantage of these points of overlap or contention.

Keywords: Transaction Cost Economics; Strategic Management; Governance Of Transactions; Markets Vs. Hierarchies; Contractual Hazards; Hybrids (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035342846
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