Shared Ownership versus Third-Party Ownership
AbstractCompetitive 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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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0138.
Length: 20 pages
Date of creation: 2010
Date of revision:
Corporate Governance; Firm-Specific Investments; Residual Rights of Control; Third-Party Ownership;
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