Jawn Lam

Oliver E. Williamson

Thinkers1932 to 2020Economist

Works

  • Markets and Hierarchies: Analysis and Antitrust Implications, 1975
  • The Economic Institutions of Capitalism, 1985

In Tactics of Organizational Politics

Ideas

Asset specificity. Some investments are specialized to a particular relationship and lose much of their value outside it, such as knowledge of one firm's systems or customers. Once such investments are made, the parties depend on each other and each is exposed to the other taking advantage, so the choice of governance, from market contract to hierarchy, turns largely on how specific the assets are.

Opportunism and bounded rationality. Williamson's transaction cost economics rests on two assumptions about people: their rationality is bounded, so contracts are always incomplete, and some are opportunistic, which he defined as self-interest seeking with guile and later described as including incomplete or distorted disclosure of information. Organizations exist partly to safeguard transactions against these hazards.

What it explains

Williamson explains why people who hold knowledge or relationships that cannot easily be replaced gain bargaining power, and why those who have invested deeply in one role can be held in place by it. He also explains why controls, approvals, and review layers grow wherever the organization fears that people will exploit what others cannot see.

Tactics that draw on Oliver E. Williamson (82)

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