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Ownership and Marginal Competition : Employee, Customer and Outside Ownership

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Listed:
  • Bolton, P.
  • Xu, C.

Abstract

This paper centers around the question of ownership of firms and managerial competition and how these affect managers and employees' incentives to invest in human capital. We argue that employees' incentives in human capital investment are affected by both ownership and competition since both ownership structure and competition provide bargaining chips to employees. Ownership provides protections which may improve or dull employees' incentives for human capital investment. When there is fierce market competition and no lock-in the allocation of ownership does not play a role (as one might expect), provided that human and physical assets are sufficiently complementary. If asset complementarity is low, ownership matters even in the absence of lock-in. In general, the most efficient ownership arrangement is that which maximizes managerial competition inside the firm.

Suggested Citation

  • Bolton, P. & Xu, C., 2000. "Ownership and Marginal Competition : Employee, Customer and Outside Ownership," Papers 20, Chicago - Graduate School of Business.
  • Handle: RePEc:fth:chicbu:20
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    References listed on IDEAS

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    More about this item

    Keywords

    PROPERTY RIGHTS ; COMPETITION ; LABOUR MARKET ; MANAGEMENT;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • P50 - Economic Systems - - Comparative Economic Systems - - - General

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