Beyond asset ownership: Employment and assetless firms in the property rights theory of the firm

Leshui He ()

Journal of Economic Behavior & Organization, 2016, vol. 130, issue C, 261-273

Abstract: This paper enriches the celebrated Grossman–Hart–Moore (GHM) property rights model with employment relationships. By combining the GHM view of the firm as a bundle of asset ownerships with that of Alchian and Demsetz (1972), who viewed the firm as a nexus of contracts, the model yields, in some cases, optimal asset ownership different from the implications of the GHM model. We show that the nexus of contracts is a meaningful instrument to govern transactions even in the presence of asset ownership. The optimal contractual network structure depends on the relationship-specificity of investments, unlike the GHM model where the asset ownership depends solely on the asset specificity of investments.

Keywords: Property rights theory of the firm; Assetless firm; Nexus of contracts (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:130:y:2016:i:c:p:261-273

DOI: 10.1016/j.jebo.2016.08.003

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