Abstract

http://ssrn.com/abstract=2091
 
 

References (29)



 
 

Citations (191)



 
 

Footnotes (27)



 


 



Power in a Theory of the Firm


Luigi Zingales


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI)

Raghuram G. Rajan


University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

November 1996


Abstract:     
What determines the boundaries of a firm? Is a firm defined solely by the ownership of physical assets as suggested by the property rights theory? This paper presents a theory of the firm based on the well-known idea that the firm improves over the market because it uses ex ante mechanisms to enhance specific investments. Maintaining the contractability assumptions of the property rights view, however, we identify not one but two such mechanisms. One is, of course, the ownership of property rights. Our contribution here is to highlight the costs of this mechanism which has been underemphasized. The second is the access agents have to the scarce resources, be they physical assets or human capital, that are needed for the production process. The theory enables us to address a number of issues including the separation of ownership and control, the importance of organizational design, and the rationale for the division of labor.

Number of Pages in PDF File: 45

JEL Classification: G30

working papers series


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Date posted: March 31, 1997  

Suggested Citation

Zingales, Luigi and Rajan, Raghuram G., Power in a Theory of the Firm (November 1996). Available at SSRN: http://ssrn.com/abstract=2091 or http://dx.doi.org/10.2139/ssrn.2091

Contact Information

Luigi Zingales (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3196 (Phone)
773-834-2081 (Fax)

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National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
University of Chicago - Polsky Center for Entrepreneurship
Chicago, IL 60637
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Raghuram G. Rajan
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)
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References:  29
Citations:  191
Footnotes:  27

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