According to McIvor (2005, p.40) TCE “c ombines economic theory with management theory to define the best type of relationship a firm should develop in the market place’’. The theory’s main contributor, however, is Williamson Oliver the Nobel Prize laureate in economics in 2009.

Main contributor and questions TCE aims to answer.

Since then, it has developed and kept expanding to become one of the most prominent management theories (Oxford Research Encyclopedia).

TCE got formalized in the late 1960s and early 1970s. Coase in his efforts to understand the vertical integration (“ the make-or-buy decision”), when he first highlighted how important is to understand the transaction’s costs.Īccording to Young (2013) transaction cost is one of the most significant factors in business operation and management, she defined Transaction Costs as the sum of all costs of making a transaction, including the cost of planning, deciding, changing plans, resolving disputes, and after-sales.

The theory has its roots back in 1937 in the seminal work of Ronald H. Transaction Cost Economics described shortly by “TCE”, is by far the most used theory in the P&SC literature (Perunovic and Pedersen 2007 Ketokivi and Mahoney 2020), moreover it is the most influential theory on Outsourcing (McIvor, 2005)

Transaction cost economics theory