Transaction cost economics have come to dominate discussions about the nature of the firm. In this critical analysis of the transaction cost paradigm, Michael Dietrich argues that whilst it offers some vital insights, the transaction cost approach is an inadequate basis for a general theory of the firm. Beginning with an overview of transaction costs, the book pays particular attention to the work of Oliver Willaimson in outlining both the advantages and the disadvantages of the approach. Assuming that the organization of the firm is static, transaction cost economics is least effective in explaining the dynamic aspects of firms' behaviour. However, rather than rejecting the whole approach on these grounds, Michael Dietrich looks at ways in which the theory can be enlarged and its explanatory power increased. Considering such recent innovations as total quality control and just-in-time management. the book presents a vision of the firm in which decision making can be both hierarchical and creative. The implications of this for business policy are assessed.