Standard transaction cost economics (TCE) considers transactions from the perspective of static efficiency. Increasingly, attention is required to dynamic efficiency; to capabilities to exploit transaction relations for innovation. Since innovation is dependent on knowledge and learning, the step from the statics to the dynamics of exchange requires an understanding of the development and acquisition of knowledge, preferences, and meaning, and the role in that of interaction between transaction partners. As a step towards this, the article provides an exploration of theories of knowledge and knowledge development, the relation to language, the role of intersubjective relations, the connection with evolutionary theory and the implications for transaction cost theory.
