Inside Vs Outside Ownership: A Political Theory of the Firm

  title={Inside Vs Outside Ownership: A Political Theory of the Firm},
  author={H. Mueller and Karl Warneryd},
  • H. Mueller, Karl Warneryd
  • Published 1999
  • Business, Economics
  • If contracting within the firm is incomplete, managers will expend resources on trying to appropriate a share of the surplus that is generated. We show that outside ownership may alleviate the deadweight losses associated with such costly distributional conflict, even if all it does is add another level of conflict. In case managers have to be provided with incentives to make firm-specific investments, there is a tradeoff between minimizing rent-seeking costs and maximizing output. This… CONTINUE READING
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