Signifying Williamson's Contribution to the Transaction Cost Approach: An Agent‐Based Simulation of Coasean Transaction Costs and Specialization

27 Pages Posted: 14 Dec 2014

See all articles by Per L. Bylund

Per L. Bylund

School of Entrepreneurship; Ratio Institute; Ludwig von Mises Institute

Date Written: January 2015

Abstract

This article simulates Ronald Coase's transaction cost approach to firm organizing using agent‐based modelling, and contextualizes and contrasts it with a division‐of‐labour/specialization view of the firm that Coase challenged and sought to replace. The simulation tests the firm formation process based on the different implications of transaction costs and specialization as drivers of integration, focusing especially on Coase's rejection of specialization as an explanation for integration in the firm. The results show little support for, and suggest an important shortcoming to, Coase's transaction cost theory. My findings thereby indicate a potential relationship between the specialization theory and Williamson's Transaction Cost Economics, especially the latter's emphasis on co‐specialization through relationship‐specific investments, which helps shed light on TCE's significant influence in the theory of the firm literature.

Keywords: agent‐based model, firm formation, simulation, specialization, Transaction Cost Economics, transaction costs

Suggested Citation

Bylund, Per L., Signifying Williamson's Contribution to the Transaction Cost Approach: An Agent‐Based Simulation of Coasean Transaction Costs and Specialization (January 2015). Journal of Management Studies, Vol. 52, Issue 1, pp. 148-174, 2015, Available at SSRN: https://ssrn.com/abstract=2538024 or http://dx.doi.org/10.1111/joms.12110

Per L. Bylund (Contact Author)

School of Entrepreneurship ( email )

Oklahoma State University
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Stillwater, OK 74078
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4057444301 (Phone)

HOME PAGE: http://https://business.okstate.edu/directory/bylund-per-694946.html

Ratio Institute ( email )

P.O. Box 3203
SE-103 64 Stockholm
Sweden

Ludwig von Mises Institute ( email )

Auburn, AL
United States

HOME PAGE: http://mises.org/bylund

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