Understanding Smart Contracts as a New Option in Transaction Cost Economics

Proceedings of the 40th International Conference on Information Systems, Munich, Germany, December 2019

15 Pages Posted: 9 Jan 2020

See all articles by Hanna Halaburda

Hanna Halaburda

New York University (NYU) - Leonard N. Stern School of Business

Natalia Levina

New York University

Min Semi

affiliation not provided to SSRN

Date Written: May 1, 2019

Abstract

Among different concepts associated with the term blockchain, smart contracts have been a prominent one, especially popularized by the Ethereum platform. In this study, we unpack this concept within the framework of Transaction Cost Economics (TCE). This institutional economics theory emphasizes the role of distinctive (private and public) contract law regimes in shaping firm boundaries. We propose that widespread adoption of the smart contract concept creates a new option in public contracting, which may give rise to a smart-contract-augmented contract law regime. We discuss tradeoffs involved in the attractiveness of the smart contract concept for firms and the resulting potential for change in firm boundaries. Based on our new conceptualization, we discuss potential roles the three branches of government – judicial, executive, and legislative – in enabling and using this new contract law regime. We conclude the paper by pointing out limitations of the TCE perspective and suggesting future research directions.

Keywords: smart contracts, blockchain, TCE, smart contracts specification costs, asset specificity

JEL Classification: D86, L14, L24

Suggested Citation

Halaburda, Hanna and Levina, Natalia and Semi, Min, Understanding Smart Contracts as a New Option in Transaction Cost Economics (May 1, 2019). Proceedings of the 40th International Conference on Information Systems, Munich, Germany, December 2019. Available at SSRN: https://ssrn.com/abstract=3506223

Hanna Halaburda (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Natalia Levina

New York University ( email )

44 West Fourth Street
New York, NY 10012
United States

HOME PAGE: http://pages.stern.nyu.edu/~nlevina

Min Semi

affiliation not provided to SSRN

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