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Why Should the Boss Own the Assets?

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  • Birger Wernerfelt

Abstract

In the context of an employment relationship, I present an argument suggesting that it is more efficient for the boss to own the productive assets. The idea is that a conflict between productivity and depreciation is internalized if the player deciding what an asset is used for also has residual claims. An empirical test finds evidence consistent with this. By asking whether the boss should own the assets, the paper reverses the reasoning from the literature in which it is argued that the owner has power and thus is the boss. Copyright (c) 2002 Massachusetts Institute of Technology.

Suggested Citation

  • Birger Wernerfelt, 2002. "Why Should the Boss Own the Assets?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(3), pages 473-485, September.
  • Handle: RePEc:bla:jemstr:v:11:y:2002:i:3:p:473-485
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    Cited by:

    1. Wernerfelt, Birger, 2004. "Robust Incentive Contracts," Working papers 4448-03, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Kim, Jongwook & Mahoney, Joseph T., 2008. "A Strategic Theory of the Firm as a Nexus of Incomplete Contracts: A Property Rights Approach," Working Papers 08-0108, University of Illinois at Urbana-Champaign, College of Business.
    3. Birger Wernerfelt, 2013. "Small forces and large firms: Foundations of the RBV," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 635-643, June.
    4. Eric Van den Steen, 2010. "Interpersonal Authority in a Theory of the Firm," American Economic Review, American Economic Association, vol. 100(1), pages 466-490, March.

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