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Is There A Role For Transaction Cost Economics If We View Firms As Complex Adaptive Systems?

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  • J FOSTER

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This article assesses the usefulness of transaction cost economics when we view economic organizations, such as firms, as complex adaptive systems. Modern complexity science is radically different in orientation to neoclassical economics, which deals with decision making in contexts that are presumed to be simple and, therefore, disconnected from complex reality. However, transaction cost economics can be related to aspects of modern complexity science: bounded rationality, opportunism, and asset specificity are all associated with behavioral complexity. Furthermore, the emphasis of transaction cost economics on hierarchy and organizational rather than technological considerations is also consistent with complexity science. Drawing on literature in psychological economics, this article synthesizes transaction cost economics with aspects of complexity science in a manner that offers a new research agenda, not only in the context of the organization of production but in economics generally. Such theoretical developments are vital if policy makers are to have at their disposal analytical perspectives that are coherent and applicable in complex historical settings.

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  • J Foster, 2000. "Is There A Role For Transaction Cost Economics If We View Firms As Complex Adaptive Systems?," Contemporary Economic Policy, Western Economic Association International, vol. 18(4), pages 369-385, October.
    • Handle: RePEc:bla:coecpo:v:18:y:2000:i:4:p:369-385
    DOI: 10.1111/j.1465-7287.2000.tb00034.x
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    Cited by:

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    2. Frederik Banning & Jessica Reale & Michael Roos, 2023. "The Complexity of Corporate Culture as a Potential Source of Firm Profit Differentials," Papers 2305.14029, arXiv.org, revised Nov 2023.
    3. Christopher A. Hartwell, 2017. "Understanding “Development”: Insights from Some Aspects of Complexity Theory," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(2), pages 165-190, November.
    4. Madlener, Reinhard & Stagl, Sigrid, 2005. "Sustainability-guided promotion of renewable electricity generation," Ecological Economics, Elsevier, vol. 53(2), pages 147-167, April.
    5. Perrons, Robert K., 2009. "The open kimono: How Intel balances trust and power to maintain platform leadership," Research Policy, Elsevier, vol. 38(8), pages 1300-1312, October.

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