ABSTRACT
In this chapter, the basic elements of transaction cost economics will be outlined. In addition to the objective of introducing the reader to the literature the chapter will also develop a number of general problems that are evident with the approach. The explicit recognition of these problems will facilitate detailed discussions undertaken in later chapters. The material is organised as follows. Initially, Ronald Coase’s (1937) paper, ‘The nature of the firm’, will be examined. This work is separated from later contributions to the area for two reasons: first, Coase is generally acknowledged as the ‘founder’ of transaction cost economics (although he does not use this term in his 1937 paper), and for this reason his work is important in its own right; secondly, his analysis is, in many respects, more accessible as later contributors have built on his formulations (and at the same time compounded his shortcomings). Following this discussion of Coase, other antecedents of transaction cost economics will be examined. Finally, Oliver Williamson’s work will be critically outlined; the work of other transaction cost theorists will be introduced in later chapters.
