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Ownership of firms and efficiency: The competence argument

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  • Pavel Pelikan

Abstract

To assess alternative forms of ownership of firms and allocation of capital, the standard incentive argument is complemented and qualified by an argument considering competence. Regarding capital as a currency conveying decision authority for organizing production, this argument recognizes that the competence for exercising this authority is scarce. The allocation of this competence is studied as the key part of the allocation of scarce economic competence, which requires organizational change and determines the efficiency of allocation of all scarce resources, including economic competence itself. Comparative institutional analysis reveals the superiority of a constitution that requires private and tradeable ownership of firms and open entry to capital markets in the organization of supply, while it limits economic inequalities and provides for policies intervening in competence-requiring final demand. Copyright George Mason University 1993

Suggested Citation

  • Pavel Pelikan, 1993. "Ownership of firms and efficiency: The competence argument," Constitutional Political Economy, Springer, vol. 4(3), pages 349-392, September.
    • Handle: RePEc:kap:copoec:v:4:y:1993:i:3:p:349-392
    DOI: 10.1007/BF02393268
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    References listed on IDEAS

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    1. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
    2. Pelikan, P, 1992. "The Dynamics of Economic Systems, or How to Transform a Failed Socialist Economy," Journal of Evolutionary Economics, Springer, vol. 2(1), pages 39-63, March.
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    1. Henrekson, Magnus & Johansson, Dan, 2010. "Firm Growth, Institutions and Structural Transformation," Working Paper Series 820, Research Institute of Industrial Economics.
    2. Pelikan, Pavel, 1994. "Competitions of Socio-Economic Institutions: In Search of the Winners," Working Paper Series 422, Research Institute of Industrial Economics.
    3. Pelikan, Pavel, 2006. "Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy," Ratio Working Papers 85, The Ratio Institute, revised 03 Sep 2006.
    4. Pelikan, Pavel, 2004. "Interconnecting Ecolutionary, Institutional and Cognitive Economics: Six Steps towards Understanding the Six Links," Ratio Working Papers 48, The Ratio Institute.
    5. Pelikan, Pavel, 1997. "Allocation of Economic Competence in Teams: A Comparative Institutional Analysis," Working Paper Series 480, Research Institute of Industrial Economics.
    6. Pelikan, Pavel, 1999. "Institutions for the Selection of Entrepreneurs: Implications for Economic Growth and Financial Crises," Working Paper Series 510, Research Institute of Industrial Economics, revised 15 Feb 2000.
    7. Dan Johansson, 2004. "Economics Without Entrepreneurship or Institutions: A Vocabulary Analysis of Graduate Textbooks," Econ Journal Watch, Econ Journal Watch, vol. 1(3), pages 515-538, December.
    8. Magnus Henrekson & Dan Johansson & Mikael Stenkula, 2010. "Taxation, Labor Market Policy and High-Impact Entrepreneurship," Journal of Industry, Competition and Trade, Springer, vol. 10(3), pages 275-296, September.
    9. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 43-74, May.
    10. Nicolai J. Foss, 1999. "Capabilities, Confusion, and the Costs of Coordination On Some Problems in Recent Research On Inter-Firm Relations," DRUID Working Papers 99-7, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Fridh, Ann-Charlotte, 2003. "The Exit of Pharmacia and Regional Growth," Ratio Working Papers 22, The Ratio Institute.
    12. Nicolai J. Foss & Peter G. Klein & Lasse B. Lien & Thomas Zellweger & Todd Zenger, 2021. "Ownership competence," Strategic Management Journal, Wiley Blackwell, vol. 42(2), pages 302-328, February.
    13. Henrekson, Magnus & Sanandaji, Tino, 2016. "Owner-Level Taxes and Business Activity," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 12(1), pages 1-94, March.
    14. Mulligan, Robert F., 2004. "Fractal analysis of highly volatile markets: an application to technology equities," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(1), pages 155-179, February.
    15. Ricketts Martin, 2000. "Competitive Processes and the Evolution of Governance Structures," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 10(2-3), pages 1-18, June.
    16. Larry Kiser, 1994. "A constitutional theory of public enterprise," Constitutional Political Economy, Springer, vol. 5(3), pages 287-306, September.

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