Transactions cost and boundary of the firm

This paper presents the basics of the Transaction cost theory (TCT) and shows it's contribution to the Theory of the firm by the view of the new institutional economics. In the first part, author presents resources and presumptions of the TCT mainly by O. E. Williamson. The theory is based on asset specificity. The formal model with the human asset specificity is supposed to reply following questions. Why the firm arise and where is the boundary of the firm? In the second part, the model TCT is extending by knowledge-based explanations of the firm.