Towards a Positive Interpretation of Transaction Cost Theory: The Central Roles of Entrepreneurship and Trust.

This paper proposes a positive interpretation of transaction cost theory (TCT) and explores the roles of entrepreneurship and trust. The author presents a critique of TCT that offers a reappraisal of the theory's basic assumptions and postulates in order to reveal its previously neglected positive and humanistic side. The author's aim is to reorient TCT and show that (1) it is possible to embrace the central views of the theory and thus preserve the predictive ability of TCT while (2) weakening and even dispensing with the negative and emotive connotations of terms such as opportunism and asset specificity. The author's analysis shows that a strong assumption of opportunism is neither a necessary nor a sufficient condition for TCT to be able to produce refutable propositions and hypotheses.