By Glenn Carroll**
In the mid-1970s organizational sociology underwent a paradigmatic revolution. A theoretical model of rational goal pursuit through highly adaptable structures known as contingency theory was overthrown by several new perspectives, including the transaction costs framework of Oliver Williamson. The perspectives framed research on organizations for the decades to follow.
I came to graduate school at Stanford in 1976 and lucked into a front row seat at the revolution. Major proponents of each perspective worked at Stanford or Berkeley and in 1977-78 Oliver spent a year here at the Center for Advanced Study in the Behavioral Science. Despite vast intellectual differences, we were all part of a scientific community that met regularly in formal and informal ways to discuss organizational issues. Accordingly, my fellow students and I learned transaction costs economics as part of the new world order in organizational theory. It subsequently became a component of what I taught students in my PhD seminars.
Olly later became my colleague at Haas. It immediately became obvious that Olly had read an enormous amount of Sociology and found it a source of ideas. He also attended conferences composed of mainly sociologists. We taught together---a semester-long seminar discussing Jim Coleman’s book, The Foundations of Social Theory (Olly’s idea). Olly regularly invited sociologists to speak at his weekly seminar and always encouraged the locals to attend. Olly told his students to take my seminar. And, I knew I was always welcome at his house; we played golf together and even went fishing.
In my view, Williamson’s impact on Sociology is harder to pin down than it is for, let’s say, Political Science. Although his ideas were highly cited by sociologists, often they were used as a takeoff point. For instance, sociologists accepted the M-form hypothesis, but also aimed to show the factors it omitted. Sociologists also complained about what they saw as an oversimplified view of authority and fiat. We never discussed it, but I think Olly must have felt some regret that he did not have more direct influence on sociological theory with ideas like the Fundamental Transformation.
Williamson’s influence on Sociology was indirect but profound. Ironically enough to economists, sociologists saw transaction costs theory as an under-theorized view of economic action, which insufficiently incorporated key social relations, especially in conceptualizing the market. His ideas prompted them to specify precisely what they thought was missing and to make a case for its inclusion. In this sense, Williamson spurred along the rapid development of Economic Sociology, which soared to become one of the largest sections of the American Sociological Association.
Before closing, I want to mention one question that Olly regularly asked me. Olly’s specialty was the analysis of market failures, as we all know, and he was rightfully known as an organization theorist. Yet, oddly enough, I don't think he always saw himself that way, at least in the full sense of someone who went into an organization and looked at what was going on and tried to make sense of it. I say that because he regularly mentioned to me that we needed a theory of organizational failure to complement the theory of market failure. I studied organizational mortality at the time but what I was doing was not what he meant. Rather, he wanted a theory based on analyses situated inside organizations; one that identified and analyzed the systematic impediments to efficient internal coordination. He thought sociologists could help by going into these boisterous ‘saloons’ and discovering and analyzing why they underperformed at times.*** Sure, we knew about goal displacement, misaligned incentives, bureaucratic ossification and the like. But that’s a list and an incomplete one at that. Olly wanted a framework, a conceptual arrangement that ordered and prioritized these behavioral sources of failure. It was, and still is, a great aspiration for Sociology---every few months I wake up and find myself thinking about it, realizing we are not yet close to being there.
* Jim March coined the phrase ‘Saloons of Sociology’ out of affection, as David Kreps has described in his essay in American Academic Culture in Transformation (edited), Princeton University Press, 1997.
**Glenn Carroll is the Adams Distinguished Professor of Management and (by courtesy) Professor of Sociology at Stanford University.
***As Bob Gibbons has noted, Olly’s own agenda on the “the costs of integration” did not attract anywhere near the research attention other parts of the transaction costs agenda did. See R. Gibbons, 2010, Scandinavian Journal of Economics 112: 263-288.