EMPIRICAL-RESEARCH IN TRANSACTION COST ECONOMICS - A REVIEW AND ASSESSMENT

This article summarizes and assesses the growing body of empirical res earch in transaction cost economics (TCE). Originally an explanation f or the scale and scope of the firm, TCE is now used to study a variety of economic relationships, ranging from vertical and lateral integrat ion to transfer pricing, corporate finance, marketing, the organizatio n of work, long-term commercial contracting, franchising, regulation, the multinational corporation, company towns, and many other contractu al relationships. The main insights and predictions of TCE-in particul ar, the importance of governing transactions-are becoming increasingly accepted. The empirical support for these claims, however, is much le ss known. We believe the empirical literature, on the whole, is remark ably consistent with the predictions of TCE-more so than is typically the case in economics. After presenting an overview of the theory and a discussion of some theoretical and methodological preliminaries, we summarize the major findings and discuss their implications, particula rly the potential applications to public policy. In an appendix we pro vide a more comprehensive list of articles, arranged by type of study, as a reference aid for researchers.