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Access, Veto, and Ownership in the Theory of the Firm

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  • Roland Bel

Abstract

Ownership may not always be the best driver of investment incentives in an incomplete contract context. Instead, we argue that ownership contains two facets--access and veto--that can be used specifically, and sometimes independently, to foster investment. Whereas prior studies in the literature have reported the effect of these mechanisms separately on incentives and welfare, we cast them within a single framework. Access is closer to efficiency than ownership when assets are complements at the margin; veto is sometimes closer to efficiency when assets are substitutes at the margin. Access increases the incentives of the beneficiary agent, whereas veto increases the incentives of the constrained agent. By defining control over an asset as "access with no outside veto," we provide a rationale for the optimality of intriguing organizational structures, such as open access, hybrid organizations, outside ownership, joint ownership, partnerships, and employment contracts. (JEL C70, D23, G30, L20) The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Roland Bel, 2013. "Access, Veto, and Ownership in the Theory of the Firm," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(4), pages 871-897, August.
    • Handle: RePEc:oup:jleorg:v:29:y:2013:i:4:p:871-897
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    File URL: http://hdl.handle.net/10.1093/jleo/ews003
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    Cited by:

    1. Smirnov, Vladimir & Wait, Andrew, 2016. "Technology, team production and incentives," Economics Letters, Elsevier, vol. 141(C), pages 91-94.
    2. Valeria Gattai & Piergiovanna Natale, 2017. "A New Cinderella Story: Joint Ventures And The Property Rights Theory Of The Firm," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 281-302, February.
    3. Roland Bel, 2018. "A property rights theory of competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 39(6), pages 1678-1703, June.
    4. Valeria Gattai & Piergiovanna Natale, 2016. "Optimal Ownership Regime in the Presence of Investment Spillovers," Working Papers 332, University of Milano-Bicocca, Department of Economics, revised 29 Mar 2016.
    5. Roland Bel, 2015. "A note on asset specificity," Economics Bulletin, AccessEcon, vol. 35(3), pages 1645-1651.
    6. Valeria Gattai & Piergiovanna Natale, 2014. "Joint Ventures and the Property Rights Theory of the Firm: a Review of the Literature," Working Papers 287, University of Milano-Bicocca, Department of Economics, revised Dec 2014.

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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