The purpose of this paper is to appraise the analytical usefulness of Williamson's theory of the firm by investigating the explanatory capacity of transaction cost concept. Particularly, the aim is to criticize Williamson's main tenet that the emergence of the hierarchical form of capitalist production system can be analysed in terms of efficiency considerations. Contrary to Williamson's rationale, I conclude that the concept of power seems, in contrast to Williamson's adherence to the

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... y principle, to be a more effective analytical tool in explaining the establishment of the factory system.