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Oliver Eaton Williamson, one of the founders of the field of organizational and institutional economics, passed away on May 21, 2020 in Berkeley, California. Among the most influential scholars of the social sciences during the last half-century, the genesis and impact of his ideas can be found far beyond the boundaries of his home discipline of economics. Oliver recognized that, because contracts are necessarily incomplete, numerous hazards may arise that impede effective contracting. When these hazards are sufficiently large, arms-length transactional markets will be less efficient than alternative forms of governance such as joint ventures, firms, or government institutions. Oliver's theory of transaction cost economics has contributed foundationally to the shaping of the strategy field. 

Oliver was elected to the National Academy of Sciences in 1994 and was awarded the Nobel Prize in Economic Sciences in 2009. He was brilliant in his ideas, demanding in his expectations, munificent with his time, gentle in his critiques, and modest in his fame. The Strategic Management Division mourns his passing.

On behalf of the STR Division, we invited several former students and colleagues to share their thoughts about Oliver and his work. We hope that you will find this meaningful.

            --John M. de Figueiredo, Kyle J. Mayer, and Brian S. Silverman

Nicholas S. Argyres and Jackson A. Nickerson

Washington University in St. Louis

Oliver Williamson did not set out to contribute to the field of strategic management. Yet through his research and devoted teaching of Ph.D. students, he transformed the field.  Before Williamson, strategy scholars had long known that choices involving organizational structures, vertical integration, and interorganizational relationships, are important strategic decisions that affect organizational performance. Not until Williamson developed his transaction cost approach, however, did strategy scholars learn how much light economics can shed on these choices, and how many testable predictions it can generate. 

Ultimately, Williamson's transaction cost economics can be credited with putting the economic theory of the firm at the heart of strategic management. This move produced critical implications for many corporate strategy phenomena, including mergers, acquisitions, divestitures, and diversification; interfirm contracts and collaborations including alliances, joint ventures and franchising; the organization of R&D, innovation, and entrepreneurship; knowledge management including the organization of problem-solving; organizational adaptation and change; and foreign investment. Indeed, this list is only partial. A telling marker of Williamson's influence on strategic management is that, while he only published two papers in the Strategic Management Journal, the field's primary journal, he is one of the top two most-cited scholars in the field.

The core idea in Williamson's view on strategy is that economizing is more fundamental than strategizing. Economizing choices of governance, by reducing contracting hazards, enable firms to make the kinds of co-specialized investments that facilitate the creation and capture of value, and organizational survival. Strategizing moves, he thought, are more easily countered by rivals.

Williamson's Dean once characterized him as an excellent teacher. Williamson took exception to this description, remarking that, "I describe myself not as a good teacher but as a conscientious teacher, and I enjoyed working with all of these [Ph.D. students]." This conscientiousness was manifest in his willingness to quickly and thoroughly read and comment on everything students handed to him. "What is going on here?" is one of the comments Williamson's strategic management Ph.D. students remember all too well. He combined this spirit of inquiry and intellectual curiosity with a high degree of integrity and intellectual honesty, open-mindedness, a willingness to challenge orthodoxy, and a relentless demand for research excellence. These values shaped his students as scholars, and as people. Through them, Oliver Williamson's legacy will continue to shape the field of strategic management.

Janet E.L. Bercovitz

University of Colorado - Boulder

Oliver Williamson was particular about his pretzels (Synder's of Hanover Sourdough Hard Pretzels; fresh – stale pretzels were an abomination) and his beer (premium brands, in bottles not cans). There were serious ramifications for failing to meet these standards when providing the traditional refreshments for the weekly Institutional Analysis ("IDS 270") speaker's seminar at Berkeley. Likewise, Oliver was insistent that hard-copies of the papers for these interdisciplinary seminars be delivered in a timely fashion across campus – to the law school, to the economics department, and across the business school. Distribution errors or delays were frowned upon. (I can attest to the fall-out from missteps with either of the above tasks!) With the perspective of time, Oliver's motives for these requirements have become clear to me – it was all about setting the foundation for community and conversation. Oliver relished these seminars and the informal discussions that followed (for which beer and pretzels were an important part) as a forum to build connections, spark intellectual exchange, debate ideas, and propose and challenge alternative hypotheses.

Framed against this experience, it is evident that Oliver Williamson's legacy to our profession and to the individuals he directly interacted with – students, colleagues, and critics – extends far beyond his Nobel prize-winning Theory of the Firm, though that alone would have been enough. Oliver also embodied and shared a refined and rigorous approach to research. Leading by example, Oliver taught us to engage, read widely (both within and across disciplines), be curious about the world around us, and actively question accepted explanations for observed organizational phenomena. He emphasized how important it was to articulate the assumptions you are building from, and then pressed us to dig deep and work through the logic (in a "modest, slow, molecular, definitive" way) to illuminate "What's going on here?" Though it could be a challenge to meet Oliver's exacting standards – in pretzels, beer, and research – a comparative, discriminating, analysis indicated that the benefits clearly outweighed the costs. We in the strategic management community are better off for Oliver's contributions and influence. So, let me offer a bittersweet "cheers," and please join me in eating a pretzel and drinking a beer in Oliver's memory.

Witold J. Henisz

University of Pennsylvania

The Nobel Committee recognized in 2009 that modest, slow, definitive serious work is the best means to effect revolutions in the social sciences. But as important, if not more so, was the manner in which Oliver Williamson sought to transfer the art of scholarship to his students and, indirectly, to his students' students. His actions as an advisor embodied and defined true scholarship: a relentless demand for excellence from oneself and others in explaining practically relevant and empirically verifiable causal relationships, irrespective of disciplinary boundaries, prevailing conventional wisdom or the receptiveness of audience. His students were indelibly imprinted by their interactions with him – from the patient, early-stage development of ill-formed ideas into viable dissertations, through post-job-market weekly meetings that transformed those dissertations into publishable (if never truly complete) projects, to continued guidance during their careers. He toughened our skin to criticism and convinced us that the scholarly demand for yet more revisions is a challenge to strive to meet, not to avoid. His own work provided a powerful reference for ideas and set an example of how to construct interdisciplinary arguments that rest on firm micro-analytic foundations with clear practical relevance. In every interaction we have with past, current and prospective doctoral students, we try to capture the spirit of those interactions as well as those unrelentingly high standards, and transfer them with similar care and compassion to the next generation of scholars.

Peter G. Klein

Baylor University

John de Figueiredo and I once found ourselves in a dinner party with Oliver Williamson, Bob Lucas, Ed Prescott, and Ned Phelps. Obviously, we were the star attractions. The conversation turned to entrepreneurship and I tried to summarize the contemporary literature for Olly and Lucas, both of whom asked pointed and insightful questions. Olly later gave a conference presentation called "Entrepreneurship: A Transaction Cost Perspective." He never fleshed it out into a full paper, telling me: "I am still struggling with entrepreneurship. Tough topic."

Yet Olly's seminal contributions have huge implications for entrepreneurship and innovation. Founders must procure inputs (including finance), organize production, and market and distribute. Some resources are owned, others are loaned. Inventors can use, sell, or license their innovations. Entrepreneurs and financiers form partnerships, join alliances, and participate in networks. Competition is frequently between platforms, not firms. On these issues the comparative analysis of discrete structural alternatives, taking asset specificity, uncertainty, and frequency into account, is central to the analysis.  (I still hope to write the definitive paper on TCE, i.e., Transaction Cost Entrepreneurship.)

I encountered Olly as a new Ph.D. student in 1988. I was overwhelmed by my courses which emphasized mathematical and statistical technique over substance. At a brown-bag lunch, Olly shared his syllabus for Econ 224, "The Economics of Institutions." I was blown away. There was Hayek, Commons, Simon, Arrow, Alchian, Demsetz, Coase, Chandler, Jensen, Holmström, Stigler, and many more. I took the course, was hooked, and never looked back.

Olly supervised with a light touch; He planted seeds and encouraged students to go where they would. Knowing my interest in Austrian economics, he once suggested I write a dissertation on the Ordo School, the influence of Hayek on Eucken and Röpke, and the role of ideas in shaping economic policy. He cautioned that this topic would be a disadvantage on the job market, but urged me to follow my passions, not the crowd. I ended up writing on more prosaic topics but never forgot that advice and have passed it along to my students.

Throughout my career Olly was a trusted advisor, an honest critic, and a friend. It was a privilege to know him and to carry forward his legacy, albeit imperfectly.

Jeffrey T. Macher

Georgetown University

Bounded Rationality. Opportunism. Transaction. Asset Specificity, Uncertainty and Frequency. Relationship-Specific Investment. Fundamental Transformation. Hold-Up. Markets, Hybrids and Hierarchies. Discriminating Alignment. Comparative Governance. In isolation, these terms have relatively little meaning. But when organized into a coherent theoretical framework, a greater understanding of economic organization obtains.

Oliver's intellectual legacy is and will remain significant and influential. He brought rigor to the governance of contractual relations and, more broadly, institutional and organizational economics. His analysis of the canonical make-versus-buy decision is perhaps the most familiar. But antitrust merger enforcement still relies on a comparative assessment of pro- and anti-competitive considerations that he promoted. And his arguments have permeated into myriad other social science disciplines and business areas beyond economics. As he noted, this was accomplished "not by advancing an overarching theory but by uncovering and explicating microanalytic features and by piling block upon block until the cumulative value added cannot be denied" (Williamson 2000).

Oliver's personal legacy is and will also remain significant and influential. He was a dedicated advisor to and advocate for his students. He was demanding in his expectations, but generous with his time. He was a dominant thinker, but remained humble. His feedback was short and direct, but prodigious in value. His tenure at UC Berkeley represented a pinnacle of intellectual inquiry. His Institutional Analysis Seminar was a must-see event with renowned speakers, interdisciplinary perspectives, and vigorous debates. His "modest, slow, molecular and definitive" approach to working through complex issues remains prominent in the research of his students. Many are thought leaders in their own right and most are part of a loose-knit network known as the "Berkeley Mafia"- a badge of honor and reverence.

Joseph T. Mahoney

University of Illinois at Urbana-Champaign

Oliver Williamson wrote Markets and Hierarchies (1975), The Economic Institutions of Capitalism (1985), and The Mechanisms of Governance (1996) for posterity. He systematically relaxed premises of the fundamental welfare theorems of economics to explain real-world institutions. Moreover, his transaction cost economics framework enables us to predict accurately the alignment of transactions and governance structures. He taught us to be better economists. Williamson taught us more than that, so much more. We are invited to be better social scientists, joining law, economics, and organization theory, and to be better citizens of the world.

• He provided his pragmatic view that, "for those who, like myself, are inclined to be eclectic, no comprehensive commitment to one approach… needs to be made. What is involved, rather, is the selection of the approach best suited to deal with the problem at hand" (1975:249).
• To bridge theory and practice, Williamson taught us to build theory based on the "canonical" problem (1996:41).
• Williamson expressed the spirit of our work in a conversation that "the world should not be organized to the advantage of the opportunistic against those who are more inclined to keep their promises. I would simply say that introspection supports this view. And all of Shakespeare's tragedies and comedies support it" (Williamson, 1990).
• Williamson speaks to us now more than ever noting that Machiavelli's logic is myopic, whereupon Machiavelli advised his prince to "get them before they get you." By contrast, the farsighted Prince is advised to consider hazards and to devise ex ante safeguards that will deter ex post opportunism. Mutual commitment supports sustainable cooperation.
• The poet Longfellow suggests: "Art is long, and Time is fleeting …" We all benefit from Williamson leaving his footprints on the sands of time as we take heart in still achieving and still pursuing the science of organization.

Joanne E. Oxley

University of Toronto

As a PhD student working with Olly (or "Professor Williamson," as I knew him) in the early 1990s, I was interested in applying TCE to international firms. As I began to explore the international business (IB) literature, I was surprised to discover a strong resonance between TCE and core ideas in many of the papers I read, but very little dialogue between the two fields. Like TCE, IB research has Coasian roots, in this case focusing on imperfections in international intermediate product markets, and the incentives these create for internalization by multinational firms through foreign direct investment. Developed by applied economists dissatisfied with models of international trade in which firms are virtually absent, IB research emerged independently – and apparently without knowledge – of Williamson's work. Perhaps as a result, many IB researchers seemed at first to be quite skeptical of TCE's potential contribution to the field – both in general, and in the context of my own work! Since then, many IB researchers have come to appreciate the granularity and comparative rigor of TCE and, today, a large swath of IB research draws explicitly on TCE. As such, I feel very much 'at home' in the IB research community. Over this same period, international economists and trade theorists have also begun to seriously grapple with questions of international firm scope and organization, incorporating insights from TCE and making them their own. Thus, when commenting in the New York Times on the announcement of Williamson's 2009 Nobel Prize, Paul Krugman expressed the view that almost all attempts to model multinational corporations "rely to some degree on Williamson's ideas." With growing dialogue among these previously insular fields, we now see a flowering of exciting new research that is pushing our understanding of the multinational corporation, and its role in the global economy, to new levels. I feel sure that Professor Williamson would approve.  

David J. Teece

University of California – Berkeley

Oliver had a profound impact on my early research and on the field of organizational economics. There were positive spillovers for management theory and practice, as well as for public policy. Olly was shaped early on by the Carnegie School, where as a graduate he rubbed shoulders with James March and Herbert Simon and Richard Nelson and Sidney Winter. In his early career he began to craft a new economic theory to explain vertical integration. That became the starting point for what became a deep dive into the economics of business organization which became "Transaction Cost Economics" (TCE). I had the good fortune to be a graduate student at Penn where Olly was on faculty, and to observe and comment upon early drafts of "Markets and Hierarchies," which was his first and, in my view, most interesting contribution to organizational theory. I found the book to be rich in managerial insights. As a plucky graduate student I proclaimed to Prof Williamson (in 1974) that he would win the Nobel Prize on that book. However, before that could happen someone had to conduct statistical/econometric studies and marshal empirical evidence that showed that the theory had explanatory power. I took on that mission with a graduate student, Kirk Monteverde, and published the first paper showing that "asset specificity" could help explain the make-versus-buy decision with respect to the automobile industry. Scott Masten did a follow-on study for the aircraft industry, and TCE began to fly high.

Translating Olly's work into management-speak was not easy, but it was very worthwhile. Even today I'm applying some of his thinking to complex issues around the ownership and use of proprietary data lakes, to help illuminate the role of managers in today's Big Tech firms. TCE does not provide an answer to every big question in organization economics…but it always yields rich insights.