New Paradigms on Ownership of the Firm A comparative Analysis across Development Stages and Institutional and Technological Contexts

This paper establishes a theoretical framework for the ongoing research project of UNU/WIDBR on Property Rights Regimes, Microeconomic Incentives and Development. It identifies the major research interests, questions, and focuses. The theoretical emphasis is on the very relevance of concrete institutional context, development stages, and technological environment to the determination of ownership and governance structures of the firm, and on the rationality behind the emergence of unconventional ownership and governance structures of the firm in the industrial sector. Four types of examples are presented to show the characteristics of major emerging unconventional ownership forms, which include the rise of institutional ownership in large publicly traded corporations in the US and UK; the expansion of employee stock ownership in the US; the emergence of joint- stock co-operatives on a large scale in China; the famous Mondragon co- operative group in Spain and Italian co-operatives in the La Lega network. Four cases are analysed to demonstrate how the changes in institutional and technological fundamentals alter the comparative cost-benefit balance of a given ownership form, which include the story of both bright and dark sides of Japanese 'companyism' and the shift in the balance between these two sides in the 1990s; the reasons why group affiliations and business diversification increase the total value of the relevant firms in India and Chile; the successful experience from Italy in imposing and sustaining a hard budget constraint to state-owned enterprises (SOBs) by supranational forces, and the evidence from China in hardening the budget constraints of local governments and local SOBs through the evolving fiscal decentralisation and monetary centralisation. In terms of policy implication, four general lessons for developing and transition economies are highlighted.