This working paper provides a summary on transaction cost economics (TCE) and recent developments thereof. After an introductory discussion of TCE’s role within the field of New Institutional Economics, a critical analysis of the contribution of the existing body of empirical literature is conducted. In recent years, researchers have continued to develop and extend TCE. Williamson (1991b) intro...

This paper studies the impact of innovation on the organizational structure. The theoretical framework predicts that a larger parental pool of knowledge raises the probability of offshoring. This holds in a national as well as an international context. However, when the producer loses territorial protection, the changeover from non-integration to integration is delayed. Employing data on German...

In this paper, we study games with continuous action spaces and non-linear payoff functions. Our key insight is that Lipschitz continuity of the payoff function allows us to provide algorithms for finding approximate equilibria in these games. We begin by studying Lipschitz games, which encompass, for example, all concave games with Lipschitz continuous payoff functions. We provide an efficient...

This paper assesses the degree of financial and economic globalisation of British and German pharmaceutical companies during 1990 and 2001 and explores the changing balance between globalisation and national embeddedness. It tries to explain both the much lower degree of globalisation of German as compared to British companies in 1990, as well as their catching up at the beginning of the 21 cen...

This paper analyzes the structure and functions of suppliers’ associations (kyoryokukai) in the automobile industry in Japan. The bilateral assembler-supplier relationship has received much attention recently as a source of Japanese industrial competitiveness. However, this paper argues that the hitherto neglected area of inter-supplier coordination in technology diffusion is at least as import...

It is well known that competition can destroy incentives to invest in firm-specific relationships. This paper examines how the tension between relationships and competition is resolved in the investment banking market, which for decades has been characterized by both relationships and competition. The model studies the impact on relationships of four different dimensions of competition: non-exc...

Procurement contracts are often renegotiated because of changes that are required after their execution. Using highway paving contracts we show that renegotiation imposes significant adaptation costs. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs are an important determinant of their bids. A structural empirical model...

When a downstream producer enters backward into the input market, a “helping the rivals” effect exists: such entry hurts the firm’s downstream business as it increases upstream competition and thus reduces the input price for rival downstream firms. This negative externality prevents the newly-created upstream unit from expanding. A spin-off enables the firm to credibly expand in the input mark...

An extensive literature shows that agency issues and transactions costs influence vertical integration. Another mature literature indicates that market structure influences competitive behavior. However, less consideration has been given to how vertical integration and market structure may interact. I address this gap by focusing on the potential for moral hazard caused by intra-firm competitio...

The seminal work by Grossman and Hart (1986 “The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration”, 94 Journal of Political Economy 691–19.) made the study of firm boundaries susceptible to formal economic analysis, and illuminated an important role for markets in providing incentives. In this essay, I discuss some new directions that the literature has taken since....