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the williamson school (2.0): heterogeneity, microanalytics and boundaries

As discussed previously, Williamson’s Nobel prize is a huge win for organization theory as well.  Williamson’s work provides a central foundation for many organization theory, strategy or organization economics PhD seminars being taught at business schools. (On the other hand, and this really surprised me, Steven Levitt mentions that young assistant professors in economics are scarcely aware of Williamson’s work.) And, Williamson’s work is heavily cited in our top organization theory and strategy journals, much more so than in mainstream economics.

So, who’s carrying Williamson’s work forth and taking it into new directions?  Williamson’s graduate students are now largely working in business schools, mostly in management and strategy departments (as verified by Peter).  Their work is taking transaction cost economics, and discussions of organizational boundaries, into interesting new directions.  In sum, the “Williamson 2.0” School seems to be focusing on the following areas: heterogeneity, microanalytics and boundaries.  Here’s a quick summary of a few of the interesting “Williamson 2.0” strands that I’ve come across:

  • Jackson Nickerson and Todd Zenger have written an important paper on envy and the boundaries of the firm.  This paper beautifully links insights from social psychology and economics to help us further understand the micro, social interactional factors that impact organizational boundaries.
  • Kyle Mayer and Nick Argyres have done interesting work on “learning to contract.” This work touches on important issues related to how contracting is learned, how it evolves and impacts organizational heterogeneity.
  • Foss and Foss have published a very nice article on property rights and transaction costs.
  • Nickerson and Zenger have also written an article on “problem-solving.” The article makes important links between knowledge-based arguments and transaction costs, helping us better understand both organizational boundaries and heterogeneity.
  • Joanne Oxley and Brian Silverman have done interesting work on transactions, alliances and R&D.
  • Williamson’s work is strongly influencing research in international business as well, for example, see the work of Mauro Guillen, Jean Francois Hennart, Peter Buckley, John Dunning, etc. (Perhaps the best taste of this will come from reading the Journal of International Business Studies.)
  • Peter Klein and Michael Sykuta have a promising volume forthcoming on transaction cost economics, with an introduction by Oliver Williamson. (And, big congrats to O&M’s Peter Klein for having his article cited in the Nobel Committee’s scientific statement.)
  • Joe Mahoney’s Economic Foundations of Strategy is a nice doctoral level book that touches on central issues related to heterogeneity and organizational economics.

More broadly, I think there are other currents in organization theory — beyond more “traditional” Williamsonians — that also relate to Williamson’s work:

  • As Williamson mentions in his 4am phone interview, transaction cost economics is part of a wider “Carnegie” program of research — and thus if we broaden Williamson 2.0 to include the Carnegie School, then we should also point to the work of many other scholars: obviously Jim March, but also Gavetti, Levinthal, Ocasio, and many others.
  • Also, Williamson’s work gets lumped into “new institutional economics” (which includes a rather broad array of scholars: Greif to Cheung to North, etc), and the link with “institutions” thus also brings in organizational sociology. So, here I’d recommend the work of, say, Victor Nee, and particularly (and, I’m a fan of this paper), Ingram and Clay’s effort to broadly link institutional work from economics and sociology: “choice-within-constraints: new institutionalism and implications for sociology.”
  • Also, I should note that the “resource-based view” (RBV) of strategy (13,700+ citations, not bad) has a long relationship with transaction cost economics.  The relationship between the RBV and transaction cost economics has always been a bit conflicted, Williamson has essentially been a foil of sorts for many strategy scholars.  However, there are of course attempts to reconcile resource-based and transaction costs intuition, I’ve even heard talk of “a unified theory” at various professional meetings, though have not seen it materialize quite yet.

The above is a very selective (and likely, biased) sampling of Williamson 2.0 research, so please feel free to add additional strands of work into the comments.

Written by teppo

October 13, 2009 at 5:26 pm

Posted in economics, sociology

8 Responses

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  1. This week I re-read Robert Freeland’s excellent “The myth of the m-form,” in which he engages Williamson over the issue of how centralized and integrated decision-making should be in a multidivisional form. This aspect of Williamson’s work, organizational integration, has also had a huge impact on organizational scholarship. It shows up routinely in strategy research about vertical and horizontal integration and is a core issue in organizational sociology concerned with the use of networks as governance structures.

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    brayden

    October 13, 2009 at 5:58 pm

  2. Yes, nice addition.

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    tf

    October 13, 2009 at 6:01 pm

  3. I read and took my comparative politics comp this summer. I didn’t get the chance to read Williamson, although I ordered Economic Institutions of Capitalism a few weeks back.

    But to the point, much of the Varieties of Capitalism literature uses Williamson as their foil. Actually it seems to me that they depend upon his work to flesh out the mirror image of their theory. If any Political Science professors are reading this, you might want to place this on any reading list if you are going to teach VOC.

    As for Economists not know about his work, I think that is the legacy of neoclassical economics and their failure to deal with institutions. I look at this Nobel as a poke in their eyes. Anyone predicting Fama actually seemed nuts to me.

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    Richard Pointer

    October 13, 2009 at 9:03 pm

  4. OK, there are some definite omissions in my list — for example, the work of Dick Langlois: http://scholar.google.com/scholar?q=richard+langlois&hl=en&btnG=Search

    And, once we get into dynamics and evolution, then naturally the work of Sid Winter, Nelson and the evolutionary school is central. Indeed, the links between TCE and the evolutionary school (and to convolute things even more: the Carnegie school) are interesting and also a strong area of focus by organizational and strategy scholars. Packing all this in might be stretching Williamson 2.0 too far.

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    tf

    October 13, 2009 at 9:11 pm

  5. Williamson’s microanalytics is a major contribution and a big departure from Coase’s model of transaction costs.. Having just come from a meeting to elect the board of my condo, opportunism is an important concept that needs to be better integrated into sociological approaches.

    Williamson remains the baseline for any discussion of firm boundaries.

    As for heterogeneiry I am less convinced. Williamson is a functionalist theory that suggests that heterogeneiry gives way to the most efficient form. One could add the concept to his foundation as his student who work in strategy are currently doing but this is a strategy contribution not a Williamsonian one in my view.

    AS for Freeland’s critique of Williamson, I really like his book even more than the AJS article. But Freeland actaully provides a more credible critique of Chandler than he does of Williamson.

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    Willie

    October 14, 2009 at 3:26 am

  6. […] I’m still a bit blown away that economists barely know Williamson’s work (let alone Ostrom’s work — this was discussed by Steven Levitt here).   However, thankfully issues of organizational boundaries and comparative institutions are being pursued by Williamsonians and organizational scholars at business schools (as we discussed here). […]

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  7. […] about organizational boundaries and capabilities?  The market-hierarchy nexus.  It seems that economists have given up on the Williamsonian program, so it remains for strategists to do this important, comparative […]

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  8. […] (realism, comparative factors, practical advice, etc).  For example, Williamson’s work (as discussed here) on organizational boundaries and production is now vigorously being carried forward by scholars […]

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