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Understanding Ownership Residual Rights of Control and Appropriable Control Rights

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Author Info
Kirsten Foss
Nicolai J. Foss

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Abstract

We discuss the notion of ownership in economics, taking our point of departure in the Grossman-Hart-Moore property rights approach. We criticize the exclusive identification of ownership with residual rights to control in this approach, and argue that economic organization may be rendered determinate under complete contracting (contrary to the GHM approach). Crucially, we argue that under complete contracting, some control rights may be appropriable because of measurement and enforcement costs. This holds the key to a theory of ownership that is not dependent on the notion of residual rights to control, but rather relies on appropriable control rights. However, the two perspectives may be complementary rather than rival.

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Publisher Info
Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 99-4.

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Date of creation: 1999
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Handle: RePEc:aal:abbswp:99-4

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Related research
Keywords: Ownership; property rights; complete and incomplete contracts;

Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Barzel, Yoram, 1994. "The capture of wealth by monopolists and the protection of property rights," International Review of Law and Economics, Elsevier, vol. 14(4), pages 393-409, December. [Downloadable!] (restricted)
  2. Rabin, Matthew, 1993. "Information and the Control of Productive Assets," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(1), pages 51-76, April.
  3. Oliver Hart & John Moore, 1998. "Foundations of Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1846, Harvard - Institute of Economic Research.
    Other versions:
  4. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December. [Downloadable!] (restricted)
    Other versions:
  5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  6. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May. [Downloadable!] (restricted)
    Other versions:
  7. Georg Nöldeke & Klaus M. Schmidt, 1992. "Option Contracts and Renegotiation - A Solution to the Hold-Up Problem," Discussion Paper Serie A 417, University of Bonn, Germany, revised Aug 1993.
    Other versions:
  8. Eric Maskin & Jean Tirole, 1997. "Unforseen Contingencies, Property Rights, and Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1796, Harvard - Institute of Economic Research.
  9. Farrell, Joseph & Gibbons, Robert, 1995. "Cheap Talk about Specific Investments," Journal of Law, Economics and Organization, Oxford University Press, vol. 11(2), pages 313-34, October.
  10. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  11. Barzel, Yoram, 1982. "Measurement Cost and the Organization of Markets," Journal of Law & Economics, University of Chicago Press, vol. 25(1), pages 27-48, April.
  12. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  13. Kreps, David M, 1996. "Markets and Hierarchies and (Mathematical) Economic Theory," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 561-95.
  14. Barzel, Yoram, 1987. "The Entrepreneur's Reward for Self-policing," Economic Inquiry, Oxford University Press, vol. 25(1), pages 103-16, January.
  15. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September. [Downloadable!] (restricted)
  16. Holmstrom, Bengt & Roberts, John, 1998. "The Boundaries of the Firm Revisited," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 73-94, Fall. [Downloadable!] (restricted)
  17. Barzel, Y., 1994. "The Capture of Wealth by monopolists and the Protection of Property Rights," Discussion Papers in Economics at the University of Washington 94-3, Department of Economics at the University of Washington.
  18. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  19. Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
    Other versions:
  20. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  22. Hart, Oliver D, 1988. "Incomplete Contracts and the Theory of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 119-39, Spring.
    Other versions:
  23. Barzel, Y., 1994. "The Capture of Wealth by monopolists and the Protection of Property Rights," Working Papers 94-3, University of Washington, Department of Economics.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242. [Downloadable!]
  2. Kirsten Foss & Nicolai J. Foss, 1999. "Organizing Economic Experiments The Role of Firms," DRUID Working Papers 99-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  3. Mahoney, Joseph & Asher, Cheryl Carleton & Mahoney, James, 2004. "Towards a Property Rights Foundation for a Stakeholder Theory of the Firm," Working Papers 04-0116, University of Illinois at Urbana-Champaign, College of Business. [Downloadable!]
  4. Kirsten Foss & Nicolai Foss, . "Theoretical Isolation in Contract Theory: Suppressing Margins and Entrepreneurship," IVS/CBS Working Papers 00-4, Department of Industrial Economics and Strategy, Copenhagen Business School. [Downloadable!]
    Other versions:
  5. Wolfgang Gick, 1999. "Vertikale Integration und informations- und kommunikationsintensive Dienstleistungen," Working Paper Series B 1999-08, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
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This page was last updated on 2009-12-16.

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