Transactions Cost Analysis
Oliver Williamson (1975) proposed looking at the costs of entering into
transactions as a focus of organizational research -- "do the parties
to the exchange operate harmoniously,or are there frequent misunderstandings
and conflicts that lead to delays, breakdowns, and other malfunctions"
(Williamson, 1981: 552).
He turns an economist's eye toward governance structures. As exchanges become
more complex and uncertain (unstable environment, unscrupulous traders),
various kinds of external and internal controls are needed to help reduce
the risk (i.e., transaction cost) of exchanges. "Organizational structures
are viewed as one important arrangement for establishing and safeguarding
transactions" (Scott p. 107). Thus organizations
are created partly to reduce transaction costs.
Williamson adds that organizational structures forms may vary with the type
of exchanges to be performed.