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Journal of Market-Focused Management

, Volume 1, Issue 4, pp 281–300 | Cite as

Transaction cost economics in practice: Applications and evidence

  • Peter G. Klein
  • Howard A. Shelanski
Article

Abstract

Transaction cost economics (TCE) has been criticized for presenting an undersocialized view of human nature, for confusing cause and effect, and for being ad hoc. This article attempts to rebut the last charge by reviewing a large body of empirical evidence on contracting and economic organization. Specifically, we maintain that enough empirical work has been carried out to shift the burden of persuasion to TCE's skeptics. As we show, the empirical evidence lines up remarkably well with the logic of organization described by TCE. After a conceptual and methodological review, we survey a range of studies on vertical integration (including forward integration into marketing and distribution), complex contracts and “hybrid” modes of organization, transfer pricing, and multinational corporations. We conclude with a discussion of the implications of TCE for business organization.

Keywords

transaction costs incomplete contracts asset specificity empirical research 

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Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Peter G. Klein
    • 1
  • Howard A. Shelanski
    • 2
  1. 1.Department of EconomicsUniversity of GeorgiaAthens
  2. 2.School of Law (Boalt Hall), University of California at BerkeleyBerkeley

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