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Team Production Theory and Corporate Law

Author

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  • Margaret M. Blair

Abstract

Corporations can be understood as solutions to team production problems, rather than as property. Incorporation involves creation of a new legal entity in which control rights are separated from residual claim rights. The corporation itself, not the shareholders nor any other corporate participants, becomes the owner of assets used in production, and of output. Decision-making authority is vested in an organizational hierarchy, headed by a board of directors that is legally independent of shareholders. Understanding corporations in this way helps explain a number of features of corporate law, and provides new insights into the theory of the firm.

Suggested Citation

  • Margaret M. Blair, 2001. "Team Production Theory and Corporate Law," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 27, pages 88-95.
    • Handle: RePEc:noj:journl:v:27:y:2001:p:88-95
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    File URL: http://www.nopecjournal.org/NOPEC_2001_a05.pdf
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    References listed on IDEAS

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    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Hart, Oliver D, 1988. "Incomplete Contracts and the Theory of the Firm," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 119-139, Spring.
    6. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    7. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
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    Citations

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    Cited by:

    1. Lorraine Uhlaner & Mike Wright & Morten Huse, 2007. "Private Firms and Corporate Governance: An Integrated Economic and Management Perspective," Small Business Economics, Springer, vol. 29(3), pages 225-241, October.
    2. Kirstein, Roland & Cooter, Robert D, 2006. "Anti-Sharing as a Theory of Partnerships and Firms," Berkeley Olin Program in Law & Economics, Working Paper Series qt4441r9r1, Berkeley Olin Program in Law & Economics.

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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