This thesis analyses transaction costs emergence and impact within the Nicaraguan coffee istry under the Sandinista Regime (1979-1990). It is argued that traditional transaction cost economics requires adjustment to be successfiilly applied in developing countries since it gnores the role of governmental policies and institutional change. Although North linked transaction costs to economic development theories, it is yet not clear how these influence particular industrial an:angements. A framework combining Williamson's and North's theories is therefore devised to explain industry evolution in a developing economy by taking into account both power relations and incentives structures.