Why Should the Boss Own the Assets?

Posted: 29 Aug 2001

See all articles by Birger Wernerfelt

Birger Wernerfelt

Massachusetts Institute of Technology (MIT) - Sloan School of Management

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Abstract

In the context of an employment relationship, I present an argument suggesting that it is more efficient for the boss to own productive assets. The idea is that a conflict between productivity and depreciation is internalized if the player deciding what an asset is used for also has residual claims. An empirical test finds evidence consistent with this. By asking whether the boss should own the assets, the paper reverses the reasoning from the literature in which it is argued that the owner has power and thus is the boss.

Keywords: Asset Ownership, Integration, Theory of the Firm

JEL Classification: D23, L22

Suggested Citation

Wernerfelt, Birger, Why Should the Boss Own the Assets?. Journal of Economics and Management Strategy, Vol. 11, pp. 473-85, 2002. Available at SSRN: https://ssrn.com/abstract=278002

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