Appropriability, Investment Incentives and the Property Rights Theory of the Firm

David de Meza and Ben Lockwood ()

The Centre for Market and Public Organisation from Department of Economics, University of Bristol, UK

Abstract: This paper examines the property rights theory of the firm when a manager's relationship-specific investment can be partially appropriated by the owner of an asset when cooperation breaks down. For example ownership typically confers the right to continue with a project even should the production team dissolve. The investments of non-owners may then be devalued, but are seldom wholly loss to the owner. With such spillovers, the outside-option principle can be incorporated into the Grossman-Hart-Moore framework without implying that ownership demotivates. Enriched predictions on the determinants of integration emerge.

Keywords: theory; of; the; firm (search for similar items in EconPapers)
JEL-codes: D23 L22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-mfd
Date: 2003-04
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Persistent link: http://EconPapers.repec.org/RePEc:bri:cmpowp:03/068

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