WILLIAMSON (Oliver E.)
The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting.
An important work by the Nobel Prize winning economist Oliver E. Williamson, building on his influential 1971 article ‘The Vertical Integration of Production: Market Failure Considerations’ in which Williamson had ‘challenged the antitrust policy view that mergers are bad because of monopoly power’. In the present book, ‘Williamson ties Coase’s notion of transactions costs to the actual workings of firms. Williamson argues that a combination of two factors hinders the abilities of firms to transact through the market: first, incomplete contracts imply a need for adaptation; and, second, relationship specificity implies a ‘fundamental transformation’ in that these adaptations will be negotiated under conditions of bilateral monopoly. This market failure is a key to the reason that some firms integrate’ (‘Oliver E. Williamson, Distinguished Fellow 2007’, in The American Economic Review).
Williamson was awarded the 2009 Nobel Prize in economics ‘for his analysis of economic governance, especially the boundaries of the firm’.
