Revisiting transaction cost approach for smart contracts & corporate investment: A new theoretical framework

Abstract

In this study, a novel theoretical framework is provided for the potential effect of smart contracts on reducing transaction costs in financial markets to increase corporate investment. The theoretical model considered in this paper is based on Williamson’s transaction cost approach and considers how an important blockchain technology such as smart contracts can induce corporate investment through its potential transaction cost reduction effect. The findings obtained show that smart contracts minimize transaction costs and increase future growth opportunities for firms to corporate investment. This study sheds new light on smart contract-based finance and its impact on business investment within the Williamson’s transaction cost framework.