Vertical Integration in the Long Run: The Provision of Physical Assets to the London and New York Stock Exchanges

In this paper the transaction cost approach of Oliver E. Williamson is applied to the long-run evolution of the provision of physical assets to the organized securities markets of London and New York. Although this evolution is shown to be in general compliance with the predictions of the transaction cost approach, questions are raised by substantial differences between the observed institutional paths. The paper argues that, if inefficient governance structures are persistent, the assumption of the transaction cost approach that attributes of transactions are exogenous and observable is misleading.