Transaction cost economics: Lessons from past reforms and potential for the digital economy

Transaction cost economics (TCE) and the theory of governance structures developed by Oliver Williamson have demonstrated significant explanatory power across institutional economics, law and economics, public policy, and strategic management. This review evaluates the predictive potential of TCE in light of profound changes in industry organization and market design, focusing on its relevance to reform processes. We compare two major historical experiences: the liberalization of infrastructure network industries (electricity, gas, rail, and telecommunications) and the privatization of state-owned enterprises in post-socialist economies, with particular attention to Russia. While the reform trajectories differed, both cases reveal the risks of neglecting asset specificity, institutional constraints, and transaction hazards, which are core concepts in TCE. Where reforms evolved through adaptive governance and coordinated institutional development, outcomes were more resilient and efficient. In contrast, rushed transitions lacking governance capacity produced systemic inefficiencies. Drawing from these experiences, we explore emerging challenges in the regulation of digital platforms and ecosystems. We argue that digitalization alters transaction costs, expands strategic interdependencies, and gives rise to hybrid forms of platform governance. These developments underscore the need to reinterpret past lessons for new institutional contexts, particularly in areas such as labor classification, competition policy, and algorithmic regulation.