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Spillovers, Investment Incentives and the Property Rights Theory of the Firm

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  • David de Meza
  • Ben Lockwood

Abstract

This paper examines the property rights theory of the firm when a manager's relationship‐specific investment can be partially appropriated by the owner of an asset even if cooperation breaks down. The investments of non owners may then be devalued, but are seldom wholly lost to the owner. With such spillovers, the outside‐option principle can be incorporated into the Grossman‐Hart‐Moore framework without implying that ownership demotivates. Enriched predictions on the determinants of integration emerge.

Suggested Citation

  • David de Meza & Ben Lockwood, 2004. "Spillovers, Investment Incentives and the Property Rights Theory of the Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 229-253, June.
    • Handle: RePEc:bla:jindec:v:52:y:2004:i:2:p:229-253
    DOI: 10.1111/j.0022-1821.2004.00224.x
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    References listed on IDEAS

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    Cited by:

    1. Gattai, Valeria & Natale, Piergiovanna, 2016. "Investment spillovers and the allocation of property rights," Economics Letters, Elsevier, vol. 145(C), pages 109-113.
    2. Valeria Gattai & Piergiovanna Natale, 2017. "A New Cinderella Story: Joint Ventures And The Property Rights Theory Of The Firm," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 281-302, February.
    3. Leonardo Felli & Kevin Roberts, 2016. "Does Competition Solve the Hold-up Problem?," Economica, London School of Economics and Political Science, vol. 83(329), pages 172-200, January.
    4. Tobias Regner & Maija Halonen-Akatwijuka, 2004. "Digital Technology And The Allocation Of Ownership In The Music Industry," Royal Economic Society Annual Conference 2004 54, Royal Economic Society.
    5. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
    6. Schmitz, Patrick W., 2014. "Optimal ownership of public goods reconsidered," Economics Letters, Elsevier, vol. 125(1), pages 21-24.
    7. Valeria Gattai & Piergiovanna Natale, 2016. "Optimal Ownership Regime in the Presence of Investment Spillovers," Working Papers 332, University of Milano-Bicocca, Department of Economics, revised 29 Mar 2016.

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