Abstract
In his seminar paper “The Nature of the Firms”, Ronald Coase explains that the boundary of the firms is determined by transaction cost. However, the influence of this paper was not recognized until the publication of “The Problem of Social Cost”. This thesis addresses the lack of operationalization in transaction cost is the reason why this “The Nature of the Firms” was “much cited, but little use”. With operationalizing transaction cost, Transaction Cost Economics (TCE), established by Oliver. E. Williamson, has been successful in inspiring empirical examinations on TCE. Moreover, this thesis examines the empirical works of TCE, and finds that the concept of asset specificity is so ambiguous that the construct of asset specificity, which used in these empirical works, cannot reflect all meaning in TCE. Moreover, these empirical works suffer from the problem of underdetermination. The core proposition tested in these works can be explained well by different competing the theory of the firms, which weakens the plausibility of TCE’s explanation.