Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm
Posted: 21 Feb 1998
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Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm
Abstract
This paper studies the Grossman-Hart-Moore (GHM) "property rights" approach to the theory of the firm under alternating-owners bargaining. When managers can pursue other occupations whilst negotiating over the division of the gains from cooperation, the GHM results obtain. If taking the best alternative job terminates bargaining, outcomes are very different. Sometimes an agent with an important investment decision should not own the asset she works with; sometimes independent assets should be owned together; sometimes strictly complementary assets should be owned separately.
JEL Classification: D21, D23, G39
Suggested Citation: Suggested Citation