Ownership and Managerial Competition: Employee, Customer, or Outside Ownership

43 Pages Posted: 16 Jul 2008

See all articles by Patrick Bolton

Patrick Bolton

Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Chenggang Xu

University of Hong Kong

Multiple version iconThere are 2 versions of this paper

Date Written: March 2001

Abstract

This paper centres around the question of ownership of firms and managerial competition and how these affect manager and employees' incentives to invest in human capital. We argue that employee's incentives in human capital investment are affected by both ownership and competition since both ownership structure and competition provide bargaining chips to employees. Ownership provides protections which may improve or dull employees' incentives for human capital investment. When there is fierce market competition and no lock-in the allocation of ownership does not play a role (as one might expect), provided that human and physical assets are sufficiently complementary. If asset complementarity is low, ownership matters even in the absence of lock-in. In general, the most efficient ownership arrangement is that which maximizes managerial competition inside the firm.

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

Suggested Citation

Bolton, Patrick and Xu, Chenggang, Ownership and Managerial Competition: Employee, Customer, or Outside Ownership (March 2001). LSE STICERD Research Paper No. TE412, Available at SSRN: https://ssrn.com/abstract=1160978

Patrick Bolton

Columbia Business School - Department of Economics ( email )

420 West 118th Street
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Chenggang Xu

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

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