Shared Ownership versus Third-Party Ownership

Stephan Nuesch and Egon Franck

No 138, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: Competitive advantage is based on a unique nexus of firm-specific investments that creates inimitable quasi-rents. Because of the impossibility of writing complete contracts, the distribution of the quasi-rents is vulnerable to opportunistic and inefficient behavior. This paper discusses two corporate governance models as institutional safeguards: shared ownership that assigns the rights of residual control to the firm-specific investors, and thirdparty ownership that assigns the rights of residual control to independent fiduciaries. Shared ownership entails higher costs of collective decision-making but lower agency costs than third-party ownership. The paper presents testable propositions, conditional on contextual factors, on which model is better able to incentivize firm-specific investments.

Keywords: Corporate Governance; Firm-Specific Investments; Residual Rights of Control; Third-Party Ownership (search for similar items in EconPapers)
Pages: 20 pages
Date: 2010
New Economics Papers: this item is included in nep-bec
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:iso:wpaper:0138

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