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Spillovers, investment incentives and the property rights theory of the firm

By David de Meza and Ben Lockwood

Abstract

This paper examines the property rights theory of the firm when a manager's relationship-specific investment can be partially appropriated by the owner of an asset even if cooperation breaks down. The investments of non owners may then be devalued, but are seldom wholly lost to the owner. With such spillovers, the outside-option principle can be incorporated into the Grossman-Hart-Moore framework without implying that ownership demotivates. Enriched predictions on the determinants of integration emerge

Topics: HG Finance
Publisher: Blackwell Publishing
Year: 2004
DOI identifier: 10.1111/j.0022-1821.2004.00224.x
OAI identifier: oai:eprints.lse.ac.uk:16181
Provided by: LSE Research Online
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