IDEAS home Printed from https://ideas.repec.org/p/ecl/illbus/12-0102.html

Who Is in Charge? A Property Rights Perspective on Stakeholder Governance

Author

Listed:
  • Klein, Peter G.

    (University of MO)

  • Mahoney, Joseph T.

    (University of IL)

  • McGahan, Anita M.

    (University of Toronto and Institute for Strategy and Competitiveness, Harvard University)

  • Pitelis, Christos N.

    (University of Cambridge)

Abstract

Debates on "shareholder" and "stakeholder" approaches to corporate governance often get bogged down in competing normative claims about economic rent streams, entitlements of different group members, fairness, and similar distributional issues. These concerns are important, but core economic issues in shareholder-stakeholder debates revolve around the positive analysis of property rights, transaction costs, ownership, and control. Going beyond the stylized assumptions of neoclassical economics, which assume away co-investment by the firm's transactional and contractual partners, we show how theories of implicit and explicit contracting help us understand better joint investments and the creation of joint value. We call on scholars of Strategic Organization to embrace more robust theories of the firm and interfirm relations that take seriously the complex web of investments and residual claims that characterize team production and co-created value.

Suggested Citation

  • Klein, Peter G. & Mahoney, Joseph T. & McGahan, Anita M. & Pitelis, Christos N., 2012. "Who Is in Charge? A Property Rights Perspective on Stakeholder Governance," Working Papers 12-0102, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:12-0102
    as

    Download full text from publisher

    File URL: http://www.business.illinois.edu/Working_Papers/papers/12-0102.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alchian, Armen A. & Demsetz, Harold, 2005. "Production, information costs and economic organization," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 45(3), July.
    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. Boris Groysberg & Linda-Eling Lee & Ashish Nanda, 2008. "Can They Take It With Them? The Portability of Star Knowledge Workers' Performance," Management Science, INFORMS, vol. 54(7), pages 1213-1230, July.
    4. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 805-851.
    5. Jensen, Michael C. & Meckling, William H., 2008. "Theory of the firm: managerial behavior, agency costs and ownership structure," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 48(2), April.
    6. Pitelis, Christos, 2009. "The co-evolution of organizational value capture, value creation and sustainable advantage," MPRA Paper 23937, University Library of Munich, Germany.
    7. 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.
    8. J. Maurice Clark, 1916. "The Changing Basis of Economic Responsibility," Journal of Political Economy, University of Chicago Press, vol. 24(3), pages 209-209.
    9. Kirsten Foss & Nicolai J. Foss, 2005. "Resources and transaction costs: how property rights economics furthers the resource‐based view," Strategic Management Journal, Wiley Blackwell, vol. 26(6), pages 541-553, June.
    10. Luigi Zingales, 2000. "In Search of New Foundations," Journal of Finance, American Finance Association, vol. 55(4), pages 1623-1653, August.
    11. Oxley, Joanne E., 1999. "Institutional environment and the mechanisms of governance: the impact of intellectual property protection on the structure of inter-firm alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 38(3), pages 283-309, March.
    12. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242.
    13. Foss,Nicolai J. & Klein,Peter G., 2012. "Organizing Entrepreneurial Judgment," Cambridge Books, Cambridge University Press, number 9780521697262, Enero-Abr.
    14. Tailan Chi, 1994. "Trading in strategic resources: Necessary conditions, transaction cost problems, and choice of exchange structure," Strategic Management Journal, Wiley Blackwell, vol. 15(4), pages 271-290, May.
    15. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    16. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    17. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135, February.
    18. Argyres, Nicholas S. & Liebeskind, Julia Porter, 1998. "Privatizing the intellectual commons: Universities and the commercialization of biotechnology," Journal of Economic Behavior & Organization, Elsevier, vol. 35(4), pages 427-454, May.
    19. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
    20. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    21. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    22. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts and the Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 39-84.
    23. Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value‐based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, March.
    24. Margit Osterloh & Bruno Frey, 2006. "Shareholders Should Welcome Knowledge Workers as Directors," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 10(3), pages 325-345, September.
    25. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    26. George Baker & Robert Gibbons & Kevin J. Murphy, 2001. "Bringing the Market inside the Firm?," American Economic Review, American Economic Association, vol. 91(2), pages 212-218, May.
    27. David J. TEECE, 2008. "Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 5, pages 67-87, World Scientific Publishing Co. Pte. Ltd..
    28. Christos N. Pitelis, 2004. "(Corporate) Governance, (Shareholder) Value and (Sustainable) Economic Performance," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(2), pages 210-223, April.
    29. Mahoney, Joseph & McGahan, Anita & Pitelis, Christos, 2009. "The Interdependence of Private and Public Interests," Papers DYNREG40, Economic and Social Research Institute (ESRI).
    30. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    31. Eggertsson,Thrainn, 1990. "Economic Behavior and Institutions," Cambridge Books, Cambridge University Press, number 9780521348911, Enero-Abr.
    32. Constance E. Helfat, 1997. "Know‐how and asset complementarity and dynamic capability accumulation: the case of r&d," Strategic Management Journal, Wiley Blackwell, vol. 18(5), pages 339-360, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mahoney, Joseph T., 2012. "Towards a Stakeholder Theory of Strategic Management," Working Papers 12-0100, University of Illinois at Urbana-Champaign, College of Business.
    2. Kim, Jongwook & Mahoney, Joseph T., 2005. "Appropriating Economic Rents from Resources: An Integrative Property Rights and Resource-Based Approach," Working Papers 05-0123, University of Illinois at Urbana-Champaign, College of Business.
    3. 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.
    4. 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.
    5. Mahoney, Joseph & Asher, Cheryl Carleton & Mahoney, James, 2004. "Towards a Property Rights Foundation for a Stakeholder Theory of the Firm," Working Papers 04-0116, University of Illinois at Urbana-Champaign, College of Business.
    6. Jongwook Kim & Joseph T. Mahoney, 2002. "Resource-based and property rights perspectives on value creation: the case of oil field unitization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(4-5), pages 225-245.
    7. Maloney, Michael T., 2017. "Alchian remembrances," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 561-582.
    8. Jongwook Kim & Joseph T. Mahoney, 2005. "Property rights theory, transaction costs theory, and agency theory: an organizational economics approach to strategic management," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 223-242.
    9. Pitelis, Christos & Teece, David, 2009. "The (new) nature and essence of the firm," MPRA Paper 24317, University Library of Munich, Germany.
    10. Eduard Marinov, 2016. "The 2016 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 97-149.
    11. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    12. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889, December.
    13. Dietrich, Diemo & Jindra, Björn, 2010. "Corporate governance in the multinational enterprise: A financial contracting perspective," International Business Review, Elsevier, vol. 19(5), pages 446-456, October.
    14. Christos Pitelis, 2013. "Towards a More ‘Ethically Correct’ Governance for Economic Sustainability," Journal of Business Ethics, Springer, vol. 118(3), pages 655-665, December.
    15. Nicolaï Foss & Nils Stieglitz, 2012. "Modern Resource-based Theory(ies)," Chapters, in: Michael Dietrich & Jackie Krafft (ed.), Handbook on the Economics and Theory of the Firm, chapter 20, Edward Elgar Publishing.
    16. Alexander Brink, 2010. "Enlightened Corporate Governance: Specific Investments by Employees as Legitimation for Residual Claims," Journal of Business Ethics, Springer, vol. 93(4), pages 641-651, June.
    17. Nicholas S. Argyres & Todd R. Zenger, 2012. "Capabilities, Transaction Costs, and Firm Boundaries," Organization Science, INFORMS, vol. 23(6), pages 1643-1657, December.
    18. Bernard Baudry & Virgile Chassagnon, 2012. "The vertical network organization as a specific governance structure: what are the challenges for incomplete contracts theories and what are the theoretical implications for the boundaries of the (hub-) firm?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(2), pages 285-303, May.
    19. Wenlong He & Tony W. Tong & Mingtao Xu, 2022. "How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment," Organization Science, INFORMS, vol. 33(1), pages 293-310, January.
    20. Guilherme Fowler A. Monteiro & Bruno Varella Miranda, 2023. "Disentangling the role of the institutional environment in the ownership competence framework: A comment on Foss et al. (2021)," Strategic Management Journal, Wiley Blackwell, vol. 44(8), pages 1939-1954, August.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:illbus:12-0102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cbuiuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.