Compare methods

	Transaction Cost Economics Analysis	Porter's Five Forces Industry Analysis
Field	Strategic Management	Strategic Management
Family	Process / pipeline	Process / pipeline
Year of origin	1979	1979
Originator	Oliver E. Williamson	Michael E. Porter
Type	Comparative-governance framework for organizing transactions efficiently	Industry-attractiveness framework based on five competitive forces
Seminal source	Williamson, O. E. (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press. ISBN: 9780029348208	Porter, M. E. (1979). How Competitive Forces Shape Strategy. Harvard Business Review, 57(2), 137-145.
Aliases	Transaction Cost Economics (TCE), Make-or-Buy Governance Analysis, Asset Specificity Governance Analysis, Markets-and-Hierarchies Analysis	Five Forces Framework, Porter Competitive Forces Analysis, Industry Attractiveness Analysis, Competitive Forces Model
Related	3	3
Summary	Transaction cost economics (TCE) analysis explains how firms should organize their economic exchanges -- whether to buy on the market, make in-house, or use a hybrid arrangement -- by minimizing the sum of production and transaction costs. Building on Coase's question of why firms exist, Oliver Williamson's 1979 article and 1985 book The Economic Institutions of Capitalism developed a comparative framework in which the efficient governance of a transaction depends on its attributes, above all asset specificity, together with uncertainty and frequency. Because human actors are boundedly rational and potentially opportunistic, contracts are inevitably incomplete; when a transaction requires investments specialized to a particular partner, those investments create quasi-rents that the partner can try to expropriate -- the hold-up problem. The central prescription, the discriminating-alignment hypothesis, is to match each transaction to the governance structure -- market, hybrid, or hierarchy -- that economizes on these transaction costs, making the make-or-buy decision a question of comparative institutional efficiency.	Porter's five forces framework explains the underlying profitability of an industry through five competitive forces that together determine how much of the value an industry creates is captured by its firms rather than competed or bargained away. Introduced in Michael Porter's 1979 Harvard Business Review article and developed fully in his 1980 book Competitive Strategy, the framework identifies the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and the intensity of rivalry among existing competitors as the collective forces that set an industry's profit potential. The stronger these forces, the more pressure on margins and the less attractive the industry; the weaker they are, the more room firms have to earn superior returns. Five forces analysis assesses each force to judge industry attractiveness and, crucially, to find a position where a firm can defend itself against the forces or shift them in its favor.