The property-rights theory of the firm with endogenous timing of asset purchase

David de Meza and Ben Lockwood

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The standard property-rights theory of the firm assumes that prior to investing in human capital, team members meet and negotiate asset ownership. This paper endogenizes the event sequence in a matching model of market equilibrium. Equilibria exist in which, for strategic and efficiency reasons, agents invest in human capital and buy assets prior to matching and simple ownership arrangements are chosen. As in the original work, ownership of physical assets affects the incentive to invest. However, in this setting ownership creates rent shifting, search and asset transfer advantages, so new results emerge. It is no longer necessarily true that key agents own. As for the form of integration, there may be multiple Pareto-rankable equilibria.

Keywords: Property rights; incomplete contracts; matching; asset ownership (search for similar items in EconPapers)
JEL-codes: C78 D23 (search for similar items in EconPapers)
Pages: 33 pages
Date: 1998-12
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Citations: View citations in EconPapers (4)

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http://eprints.lse.ac.uk/19351/ Open access version. (application/pdf)

Related works:
Working Paper: The Property-Rights Theory of the Firm with Endogenous Timing of Asset Purchase (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19351

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