Ownership and Managerial Competition: Employee, Customer, or Outside Ownership
AbstractThis paper centres around the question of ownership of firms and managerial competition and how these affect manager and employees' incentives to invest in human capital. We argue that employee's incentives in human capital investment are affected by both ownership and competition since both ownership structure and competition provide bargaining chips to employees. Ownership provides protections which may improve or dull employees' incentives for human capital investment. When there is fierce market competition and no lock-in the allocation of ownership does not play a role (as one might expect), provided that human and physical assets are sufficiently complementary. If asset complementarity is low, ownership matters even in the absence of lock-in. In general, the most efficient ownership arrangement is that which maximizes managerial competition inside the firm.
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Bibliographic InfoPaper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 412.
Date of creation: Mar 2001
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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp
Ownership; competition; incomplte contracts; human capital;
Other versions of this item:
- Patrick Bolton & Chenggang Xu, 1998. "Ownership and Managerial competition: Employee, Customer, or Outside Ownership," William Davidson Institute Working Papers Series 174, William Davidson Institute at the University of Michigan.
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