Inside vs. Outside Ownership: A Political Theory of the Firm
AbstractIf contracting within the firm is incomplete, managers will expend resources on trying to appropriate a share of the surplus that is generated. We show that outside ownership may alleviate the deadweight losses associated with such costly distributional conflict, even if all it does is add another level of conflict. In case managers have to be provided with incentives to make firm-specific investments, there is a tradeoff between minimizing rent-seeking costs and maximizing output. This suggests, among other things, an explanation of why some firms areorganized as partnerships and others as stock corporations.
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0985.
Date of creation: 01 Aug 2000
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Other versions of this item:
- Müller, Holger M. & Wärneryd, Karl, 1999. "Inside vs Outside Ownership: A Political Theory of the Firm," Working Paper Series in Economics and Finance 344, Stockholm School of Economics.
- Müller, Holger M. & Wärneryd, Karl, 1999. "Inside vs Outside Ownership - A Political Theory of the Firm," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, UniversitÃ¤t Mannheim;Sonderforschungsbereich 504, University of Mannheim 99-82, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
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