The Property-Rights Theory of the Firm with Endogenous Timing of Asset Purchase

35 Pages Posted: 16 Jul 2008

See all articles by Ben Lockwood

Ben Lockwood

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

David de Meza

London School of Economics Department of Management

Date Written: December 1998

Abstract

The standard property-rights theory of the firm assumes that prior to investing in human capital, team members meet and negotiate asset ownership. This paper endogenizes the event sequence in a matching model of market equilibrium. Equilibria exist in which, for strategic and efficiency reasons, agents invest in human capital and buy assets prior to matching and simple ownership arrangements are chosen. As in the original work, ownership of physical assets affects the incentive to invest. However, in this setting ownership creates rent shifting, search and asset transfer advantages, so new results emerge. It is no longer necessarily true that key agents own. As for the form of integration, there may be multiple Pareto-rankable equilibria.

JEL Classification: D20, D80, H11, H70, L22, P11

Suggested Citation

Lockwood, Ben and de Meza, David Emmanuel, The Property-Rights Theory of the Firm with Endogenous Timing of Asset Purchase (December 1998). LSE STICERD Research Paper No. TE364, Available at SSRN: https://ssrn.com/abstract=1160964

Ben Lockwood (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 8906 (Phone)
+44 24 7657 2548 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Emmanuel De Meza

London School of Economics Department of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom