Scientific Background: Oliver E. Williamson's Contributions to Transaction Cost Economics

In a seminal paper in 1971, and an ensuing book, Markets and Hierarchies, 4 years later, Oliver Williamson developed a detailed theory of the firm in the Coasean spirit. For reasons to be explained below, Williamson claimed that organizing transactions within firms is more desirable when transactions are complex and when physical and human assets are strongly relationship-specific. Since both complexity and specificity can be usefully measured, Williamson's theory had the required empirical content.