Inside versus outside ownership : a political theory of the firm

@inproceedings{Mller2001InsideVO,
  title={Inside versus outside ownership : a political theory of the firm},
  author={Holger M. M{\"u}ller and Karl W{\"a}rneryd},
  year={2001}
}
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 conflict costs and maximizing output. This suggests… CONTINUE READING
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