ECONOMIC GOVERNANCE

Williamson's Theory of Economic Governance

Williamson's Theory of Economic Governance

Introduction

The purpose of this paper is to enlighten the economic structure in the organizations. Since many years researchers and economists have proposed different theories pertaining to the growth and development of the economic culture in organizations. Every theory has its own methodologies to discover and formulate effective strategies for the organizations. However, the most essential theory was proposed by Williamson, for which he received the noble award in the year 2009. The purpose of this paper is to explore the theory of Oliver Williamson and its impact on the organizations.

Williamson's theory was aimed at economic governance with in the organization and proposed several effective strategies. This paper aims to explore the ideology of Williamson's theory, empirical evidence supporting the theory and its implication in the organizations. The organizations are clusters of norms and standards that control interaction among human beings. The primary aim of several organizations is to ease exchange and manufacture. The analysis of economic supremacy strives to recognize the characteristics organizations. In addition, it also focuses on the economic issues encountered by organizations.

The organizations are comprised of significant set lawful norms and sophisticated systems that defend property rights and allow the exchange of property. These norms can also be defined as the rules of the market. An additional group of organizations support manufacture and exchange outside markets. In the year 2009 the noble prize was awarded to Oliver Williamson for his tremendous efforts. The theory proposed by Williamson explored unique strategies and methodologies for achieving economic governance in organization (Abreu, Gul, 2000, 90).

Discussion

Background of the Theory

Since many years Oliver Williamson has urged that marketplaces and organizations should be seen as substitute supremacy structures. According to Williamson these markets diverge in how they resolve conflicts of interest (Abreu, Gul, 2000, 90). According to Williamson the disadvantage of markets is that interventions invite bargaining and divergence in organizations. These issues are inferior because variances can be solved by using power and influence. However, the power and influence can be violated in certain cases. The markets with comparable buyer and sellers; divergence is passable as the sellers and buyers have opportunity to find substitutes. The forecast of Williamson's theory states that there is positive correlation between mutual dependence and the people who conduct the transactions within the boundary of an organization. The level of inter-dependence is determined by the redeployment of the assets outside the relationship (Abreu, Gul, 2000, 90).

Elinor Ostrom (1990) challenged the conservative knowledge that ordinary property is poorly managed and should be totally privatized by the inner authorities of the organization. Based on several researches Ostrom interpreted that the results obtained are frequently better than the results predicted by standard theories (Aghion, Bolton, 1992, 478). The viewpoint of these ideologies were so still to incarcerate the complex institutions for the process of decision making and rule enforcement that have appeared to handle issues of curiosity in user-managed ordinary pools around the ...