I discuss and compare alternative approaches to integrating bounded rationality with the theory of economic organization, concentrating on the organizational capabilities approach, which is strongly influenced by the works of Nelson and Winter, organizational economics, particularly transaction cost economics, and, finally, a small subset of the literature on biases to judgment and cognition. I...

The role of transaction cost economics in developing research in strategy has been a hotly debated topic over the last decade. This paper presents the radical argument that transaction cost insights are more than mereful useful complements to existing approaches to strategy. Rather, they are necessary for adequately understanding the nature of strategizing. This is because transaction costs are...

The relationship between business tructures and their social and cultural setting has long interested economic historians. North [16] and Williamson [24] place information concerns at the center of their analyses of organizations and institutions. According to North, institutional arrangements, which consist of formal and informal constraints (respectively laws and behavioral codes), represent ...

Using concepts of neoinstitutional economics, such as transaction cost economics, institutional economics, property rights theory, and information economics, the development of the Open Source movement is investigated. Following the evolution of institutions in Open Source, it is discussed what the comparative institutional advantages of this model are. The conclusion is that it is the institut...

The duration of a supply relationship depends on two types of costs: (i) the transaction cost of switching suppliers and (ii) the cost of being matched to an inefficient supplier when the relationship lasts too long. I develop a model of optimal contract duration that captures this tradeoff, and I provide conditions that identify the underlying cost structure. Latent transaction costs are ident...

The last decades have seen a growing interest in the theory of the firm by economic theory. Different theoretical strands have been developed, each trying to go further than the standard micro model of the firm as a capital-labour function. The original question of what is the firm can be traced back to the classic work of Coase (1937) still, his questions were only again effectively grasped in...

Transaction is the main concept of the New Institutional Theory (NIT). According to specialists (R. Coase, O. Williamson etc.), transactions can be described by the following characteristics: asset specificity, uncertainty, frequency, transformation costs and transaction costs. Obviously, these characteristics can be divided into two groups: internal characteristics (asset specificity, uncertai...

Inspired by facts from the private-sector construction industry, we develop a model that explains many stylized facts of procurement contracts. The buyer in our model incurs a cost of providing a comprehensive design and is faced with a tradeoff between providing incentives and reducing ex post transaction costs due to costly renegotiation. We show that cost-plus contracts are preferred to fixe...