The Modern Firm, Corporate Governance and Investment
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The Modern Firm, Corporate Governance and Investment

Edited by Per-Olof Bjuggren and Dennis C. Mueller

This book explores the revolutionary development of the theory of the firm over the past 35 years. Despite rapid progress in the field, new developments in the microeconomic and industrial organization literature have been relatively scant. This book attempts to redress the balance by providing a comprehensive overview of the theory of the firm before moving on to examine firms and the organization of their economic activities. The contributors also investigate the impact of ownership structure and board composition on firm performance and study how the institutional framework of an economy affects investment decisions.
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Chapter 2: Opening the Black Box of Firm and Market Organization: Antitrust

Oliver E. Williamson


* Oliver E. Williamson The task of linking concepts with observations demands a great deal of detailed knowledge of the realities of economic life. – Tjalling Koopmans Opening the black box of firm and market organization and examining the mechanisms inside is a defining characteristic of the transaction cost approach to the study of economic organization (Arrow, 1987, 1999; Dixit, 1996; Kreps, 1990). But questions remain. Do the details matter for a wide range of phenomena or only a few? Which, among the endless number of details that could be recorded, have conceptual and operational significance? What, if any, are the public policy ramifications? My responses to these queries are that the details matter for a wide range of phenomena, that many relevant details are uncovered by examining economic organization through the focused lens of contract/governance,1 and that public policy toward business has been a beneficiary. Antitrust applications are developed here. Regulatory applications are examined elsewhere (Williamson, 2007a). I begin with a statement of the crisis in antitrust as of 1970. A synopsis of the microanalytic setup is then sketched in Section 2. The paradigm problem for transaction cost economics is the intermediate product market transaction, as described in Section 3. Antitrust applications are developed in Sections 4–8. Concluding remarks follow and there is an Appendix on the antecedents on which transaction cost economics builds. 1. THE CRISIS IN ANTITRUST Victor Fuchs opens his foreword to the National Bureau of Economic Research 50th anniversary volume, Policy Issues and Research Opportunities...

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