Mechanistic questions concerning palladium and norbornene catalyzed aryl-aryl coupling reactions are treated in this paper: how aryl halides react with the intermediate palladacycles, formed by interaction of the two catalysts with an aryl halide, and what is the rational explanation of the "ortho effect" (caused by an ortho substituent in the starting aryl halide), which leads to aryl-aryl coupling with a second molecule of aryl halide rather than to aryl-norbornyl coupling. Two possible pathways have been proposed, one involving aryl halide oxidative addition to the palladacycle, the other passing through a palladium(II) transmetalation, also involving the palladacycle, as previously proposed by Cardenas and Echavarren. Our DFT calculations using M06 show that, in palladium-catalyzed reaction of aryl halides, not containing ortho substituents, and norbornene, the intermediate palladacycle formed has a good probability to undergo transmetalation, energetically favored over the oxidative addition leading to Pd(IV). The unselective sp(2)-sp(2) and sp(2)-sp(3) coupling, experimentally observed in this case, can be explained in the framework of the transmetalation pathway since the energetic difference between aryl attack onto the aryl or norbornyl carbon of the palladacycle intermediate is quite small. On the other hand, according to the experimentally observed "ortho effect", selective aryl-aryl coupling only occurs in the reactions of ortho-substituted metallacycles. The present work offers the first possible rationalization of this finding. These in situ formed palladacycles containing an ortho substituent could more easily undergo oxidative addition of an aryl halide rather than reductive elimination from the transmetalation intermediate as a result of a steric clash in the transition state of the latter. The now energetically accessible Pd(IV) intermediate, featuring a Y-distorted trigonal bipyramidal structure, can account for the reported selective aryl-aryl coupling through a reductive elimination which is easier than aryl-norbornyl coupling. Thus, the steric effect represents the main factor that dictates the energetic convenience of the system to follow the Pd(IV) or the transmetalation pathway. Ortho substituents cause a higher energy transition state for reductive elimination from the transmetalation intermediate than for oxidative addition to the metallacycle palladium(II) and the pathway based on the latter predominates.