Transaction cost economics (TCE) deals on aspects of economic exchange, or transactions, where there are many factors in the transaction to be considered. In this case, contracts have to be incomplete since transactions have many sides, or are too complicated. There are large costs involved and the specifications have to be stated including the many details. These transactions also occur in the wider context of organizations and institutions. In other words, TCE is different from other microeconomic theories and is attractive as a subject for research by scholars. Moreover, there seemed to be inappropriate rationality in this kind of transaction because those involved have access to various kinds of information, there is no certainty in what the future holds, and there are other ambiguous decisions involved. What TCE actually introduces is how people and organizations make decisions that can provide economically efficient results. In order to attain this, the parties should be able to understand complicated aspects in how contracts work, wherein they should have the vision to provide protections to maintain the partnership in the contract (Ketokivi & Mahoney, 2016). It can be said here that the real message in TCE is in fact constructive. But these opinions have become insignificant in the continuing debate and criticisms about economic theories of organizations (Ghoshal, 2005). It is suggested in this brief information that business scholars and managers must critically reassess their jobs and not just act as observers to the complicated theories needed in business today. The debate for this significant subject matter in business must be constructive to make a balanced understanding of the issues. To do this, we need more scholars and valuable researchers in different disciplines to get involved in this kind of debate.
Reference
Ghoshal, S. (2005). Bad management theories are destroying good management practices. Academy of Management Learning & Education, 4(1), 75-91. Retrieved from http://www.corporation2050.org/documents/resources/ghoshal.pdf
Ketokivi, M., & Mahoney, J. (2016). Transaction cost economics as a constructive stakeholder theory. Academy of Management Learning & Education, 15(1), 123-138. doi: 10.5465/amle.2015.0133.
