Power in a Theory of the Firm

No 6274, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Transactions take place in the firm rather than in the market because the firm offers agents" who make specific investments power. Past literature emphasizes the allocation of ownership as the" primary mechanism by which the firm does this. Within the contractibility assumptions of this" literature, we identify a potentially superior mechanism, the regulation of access to critical resources. " Access can be better than ownership because: i) the power agents get from access is more contingent" on them making the right investment; ii) ownership has adverse effects on the incentive to specialize. " The theory explains the importance of internal organization and third party ownership. "

Date: 1997-11
Note: CF IO LE
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Citations: View citations in EconPapers (5)

Published as Quarterly Journal of Economics, Vol. 113, no. 2 (May 1998): 387-432.

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Related works:
Journal Article: Power in a Theory of the Firm (1998)
Working Paper: Power in a Theory of the Firm (1998)
Working Paper: Power in a Theory of the Firm
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