Ownership and Marginal Competition: Employee, Customer and Outside Ownership

Patrick Bolton and Chenggang Xu

Working Papers from Chicago - Graduate School of Business

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.

Keywords: PROPERTY RIGHTS; COMPETITION; LABOUR MARKET; MANAGEMENT (search for similar items in EconPapers)
JEL-codes: D23 D49 L19 L22 P50 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:fth:chicbu:20

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