Inside vs Outside Ownership: A Political Theory of the Firm

Holger M. Müller and Karl Wärneryd
Additional contact information
Holger M. Müller: Department of Economics, Postal: University of Mannheim, A5, D-68131 Mannheim, Germany

No 344, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: If contracting within the firm is incomplete, managers will expend resources on trying to appropriate a share of the surplus that is generated. We show that outside ownership may alleviate the deadweight losses associated with such costly distributional conflict, even if all it does is add another level of conflict. In case managers have to be provided with incentives to make firm-specific investments, there is a tradeoff between minimizing rent-seeking costs and maximizing output. This suggests, among other things, an explanation of why some firms are organized as partnerships and others as stock corporations.

Keywords: Outside ownership; rent-seeking; conflict; property rights; theory of the firm. (search for similar items in EconPapers)
JEL-codes: D23 D74 G32 G34 L22 (search for similar items in EconPapers)
Pages: 18 pages
Date: 1999-11-11
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-ind and nep-mic
References: Add references at CitEc
Citations:

Published in RAND Journal of Economics, 2001, pages 527-541.

Downloads: (external link)
http://swopec.hhs.se/hastef/papers/hastef0344.pdf.zip (application/pdf)
http://swopec.hhs.se/hastef/papers/hastef0344.pdf (application/pdf)
http://swopec.hhs.se/hastef/papers/hastef0344.ps.zip (application/postscript)
http://swopec.hhs.se/hastef/papers/hastef0344.ps (application/postscript)

Related works:
Working Paper: Inside vs. Outside Ownership: A Political Theory of the Firm (2000)
Working Paper: Inside vs. Outside Ownership: A Political Theory of the Firm (1999)
Working Paper: Inside vs Outside Ownership - A Political Theory of the Firm (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0344

Access Statistics for this paper

More papers in SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Helena Lundin ().