In this article, I examine the theoretical change of D. J. Teece, an advocate of Dynamic Capabilities Framework, by exploring its problemshifts. In early literatures, Teece introduces Williamsonian Transaction Cost Economics in order to explain the tendency of multinational or diversified firms to internalize their activities. However, from the perspective of complementarity, Transaction Cost Economics alone is not a sufficient solution to the problem. Therefore, he subsequently proposes that the factors of internalization should also include the costs of transferring knowledge, in addition to transaction costs. (Teece I) However, the concept of Teece I alone is still insufficient to explain the limitations of internalization and fails to describe how firms can or cannot respond to issues pertaining to innovation or environmental changes. To address these problems, Teece proposes that constraints rooted in path dependencies behave as an incentive for firms to externalize, and that organizational learning designed to broaden capabilities of firms could facilitate the utilization of external resources or capabilities and ultimately enable firms to adapt to environmental changes. (Teece II) Critics of Teece II, however, argue that broader learning alone does not enable firms to adapt to uncertain and rapid environmental changes. To address this point, Teece states the significance for firms to explore (or shape) and exploit future opportunities. Moreover, he proposes that firms should design intra-firm organizations to be nearly decomposable, which could allow them to shed path dependencies and increase the entrepreneurial abilities of members; firms should also build inter-firm institutions that could enhance the usage of external resources or capabilities. (Teece III) As summarized above, Dynamic Capabilities Framework is closely related to Transaction Cost Economics both historically and in substance. Both Teecian Dynamic Capabilities Framework and Williamsonian Transaction Cost Economics examine the issue of comparative institutions on the premise of interdependency and bounded rationality. Teece, however, attempts to describe comparative institutions in greater detail by taking into consideration interdependency and bounded rationality as beneficial factors, whereas Williamson argues the difference between markets and organizations by regarding interdependency and bounded rationality as a factor of unproductive rent seeking.