... Specificity - According to Oliver Williamson, one of the founders of the transaction cost economics school, "asset specificity" is the most important characteristic of a transaction. Asset specificity describes the degree to which investments are specialized to a particular transaction. When a party develops an asset (physical or human) specifically for a transaction, the risk is high that another party to the transaction will act opportunistically at the expense of the party that developed the asset. For instance, if an employee develops talents that are valuable only in a particular job with a particular employer, there is a danger that the employer will decline to pay her according to the value of her contribution to the firm, since the employer knows she cannot sell her skills elsewhere. The employer can pay the employee just a dollar above what she could earn in another job, where her skills will not be ...

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