Power in a Theory of the Firm

  title={Power in a Theory of the Firm},
  author={Raghuram G. Rajan and Luigi Zingales},
  journal={Chicago Booth PCE: Entrepreneurship - Other (Topic)},
  • R. RajanLuigi Zingales
  • Published 1 November 1996
  • Economics, Business
  • Chicago Booth PCE: Entrepreneurship - Other (Topic)
Transactions take place in the firm rather than in the market because the firm offers agents" who make specific investments power. Past literature emphasizes the allocation of ownership as the" primary mechanism by which the firm does this. Within the contractibility assumptions of this" literature, we identify a potentially superior mechanism, the regulation of access to critical resources. " Access can be better than ownership because: i) the power agents get from access is more contingent… 

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