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Optimal Ownership Regime in the Presence of Investment Spillovers

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  • Valeria, Gattai
  • Piergiovanna, Natale

Abstract

In the context of the property rights theory of the firm, we study the role of investment spillovers in shaping the efficiency ranking of ownership regimes. In our model, spillovers arise from asset-embodied investment and footloose investment. Under the former, the benefits of investment can be appropriated only through asset control; under the latter, the benefits of investment can be appropriated independently of asset control. Our model predicts that asset-embodied investment favors the adoption of non-integration, while joint ownership may prevail in the presence of footloose investment.

Suggested Citation

  • Valeria, Gattai & Piergiovanna, Natale, 2016. "Optimal Ownership Regime in the Presence of Investment Spillovers," Working Papers 332, University of Milano-Bicocca, Department of Economics, revised 29 Mar 2016.
  • Handle: RePEc:mib:wpaper:332
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    References listed on IDEAS

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    1. 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.
    2. Roland Bel, 2013. "Access, Veto, and Ownership in the Theory of the Firm," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(4), pages 871-897, August.
    3. Schmitz, Patrick W., 2013. "Investments in physical capital, relationship-specificity, and the property rights approach," Economics Letters, Elsevier, vol. 119(3), pages 336-339.
    4. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    5. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    6. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 387-432.
    7. David de Meza & Ben Lockwood, 2004. "Spillovers, Investment Incentives and the Property Rights Theory of the Firm," Journal of Industrial Economics, Wiley Blackwell, vol. 52(2), pages 229-253, June.
    8. Rosenkranz, Stephanie & Schmitz, Patrick W., 1999. "Know-how disclosure and incomplete contracts," Economics Letters, Elsevier, vol. 63(2), pages 181-185, May.
    9. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Incomplete contracts; Property rights; Investment spillovers; Joint-control;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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