Internal marketing has been subjected to a considerable amount of discussion, yet it is an area of marketing in need of more extensive research (Fisk, Brown, and Bitner, 1993). This conceptual study investigates internal marketing from a transaction cost perspective. Initially, it examines the origins of internal marketing in different disciplines. Secondly, it examines the numerous perspectives of internal marketing and its application in different organizations. From this basis we propose that a transaction cost approach can address those fundamental questions that have not been considered thoroughly in the past. What are the principles that form the foundations for internal marketing? Does internal marketing belong in all organizations? Is internal marketing merely synonymous with good human resource management or should the organization pursue internal marketing in conjunction with external marketing activities? Then, with the transaction cost framework in mind, the study considers how internal marketing can be measured and whether it is necessary, merely nice, irrelevant or indeed illegitimate.