Oliver Williamson

Oliver E. Williamson was an American economist at the University of California, Berkeley, who built New Institutional Economics into a theory of governance and the boundaries of the firm from the transaction-cost starting point Ronald Coase set out in The Nature of the Firm. Williamson asked which of three governance structures, an open market, a vertically integrated hierarchy (the firm itself), or a hybrid contractual arrangement such as a long-term relational contract, best governs a given transaction, and argued the answer depends chiefly on asset specificity, how much of a relationship-specific, sunk investment the transaction requires, together with the frequency of the transaction and the uncertainty surrounding it; high asset specificity creates a hazard of opportunistic hold-up once the investment is sunk, which markets govern poorly and hierarchies or carefully designed hybrid contracts govern better. He shared the 2009 Nobel Memorial Prize in Economic Sciences with Elinor Ostrom, the first woman to receive the prize, for his analysis of economic governance, especially the boundaries of the firm.