Transaction Cost Economics (TCE) is a theory that examines the costs associated with economic exchanges. These costs can include expenses related to negotiating, enforcing contracts, and managing relationships. TCE helps explain why companies choose to produce goods in-house or outsource them, based on the costs involved in each option. The theory was developed by Ronald Coase, who introduced the concept of transaction costs in his 1937 paper. TCE suggests that firms will organize their activities in a way that minimizes these costs, influencing their structure and behavior in the marketplace.