The Theory Of The Firm As Governance Structure From Choice To Contract

Topics: Contract, Economics, Transaction cost Pages: 26 (12827 words) Published: May 1, 2015
American Economic Association
The Theory of the Firm as Governance Structure: From Choice to Contract Author(s): Oliver E. Williamson
Source: The Journal of Economic Perspectives, Vol. 16, No. 3 (Summer, 2002), pp. 171-195 Published by: American Economic Association
Stable URL: http://www.jstor.org/stable/3216956
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Journal of Economic Perspectives?Volume

16, Number 3?Summer

The

Firm

of

Theory

Structure:

Oliver

the

From

E.

Choice

as
to

2002?Pages

171-195

Governance
Contract

Williamson

to
that organization
matters and that it is susceptible
propositions
there
were
economists.
To
be
sure,
analysis
long greeted by skepticism
by
in Industry and Trade
The
Marshall
were conspicuous
Alfred
exceptions:
in
and
and
(1932), Joseph
Schumpeter
Capitalism, Socialism,
Democracy (1942)
Friedrich Hayek (1945) in his writings on knowledge.
Institutional
economists
like
(1904), John R. Commons
(1934) and Ronald Coase (1937) and
theorists
like
Robert
Michels
Chester Barnard (1938),
(1915 [1962]),
organization
Herbert Simon (1957a), James March (March and Simon, 1958) and Richard Scott deserves greater prominence.
(1992) also made the case that organization

Thorstein

Veblen

reason why this message took a long time to register is that it is much matters than it is to show how and why.1 The
to say that organization
the
science
choice
to economics
has also been an
of
of
prevalence
approach
One

easier

As developed
are
herein, the lessons of organization
theory for economics
the
lens
of
con?
different and more consequential
when examined
through
tract. This paper examines
economic
from a science
of contract
organization
on
the
of
the
firm.
with
special emphasis
theory
perspective,
obstacle.
both

1 A Behavioral
Theoryof theFirm(Cyert and March, 1963) was one obvious early candidate for an economic theory of organizations. It deals, however, with more fine-grained phenomena?such as predicting department store prices to the penny?than were of interest to most economists. For a discussion, see Williamson (1999b). The recent and growing interest in behavioral economics?which deals more with the theory of consumer behavior than with the theory of the firm?can be interpreted as a delayed response to the lessons of the "Carnegie school" associated with Cyert, March and Simon.

? OliverE.
Economics

Williamson isEdgarF. Kaiser Professor of Business Administration, Professor of and Professor of Law, all at the University of California, Berkeley. His e-mail

address is (owilliam@haas.berkeley.edu).

This content downloaded from 131.174.75.30 on Tue, 21 Apr 2015 06:39:58 UTC All use subject to JSTOR Terms and Conditions

172

Journal

The

Sciences

of Economic Perspectives

of

Choice

and

Contract

Economics

the twentieth
predomithroughout
century has been developed
As
it
in
as
a
his
An Essay
science
of
choice.
Lionel
Robbins
book,
nantly
famously put
is the
on the Nature and Significance of Economic Science (1932, p. 16), "Economics which
a...


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