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Shared Ownership versus Third-Party Ownership

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Author Info

  • Stephan Nüesch

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

  • Egon Franck

    ()
    (Institute for Strategy and Business Economics, University of Zurich)

Abstract

Competitive advantage is based on a unique nexus of firm-specific investments that creates inimitable quasi-rents. Because of the impossibility of writing complete contracts, the distribution of the quasi-rents is vulnerable to opportunistic and inefficient behavior. This paper discusses two corporate governance models as institutional safeguards: shared ownership that assigns the rights of residual control to the firm-specific investors, and thirdparty ownership that assigns the rights of residual control to independent fiduciaries. Shared ownership entails higher costs of collective decision-making but lower agency costs than third-party ownership. The paper presents testable propositions, conditional on contextual factors, on which model is better able to incentivize firm-specific investments.

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File URL: http://repec.business.uzh.ch/RePEc/iso/ISU_WPS/138_ISU_full.pdf
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Bibliographic Info

Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0138.

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Length: 20 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:iso:wpaper:0138

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Related research

Keywords: Corporate Governance; Firm-Specific Investments; Residual Rights of Control; Third-Party Ownership;

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