The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration
E840032
"The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration" is a seminal economics paper by Oliver Hart (with co-authors) that develops the property-rights approach to the firm, explaining how ownership and control of assets shape optimal firm boundaries and integration decisions.
Statements (44)
| Predicate | Object |
|---|---|
| instanceOf |
academic article
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economics paper ⓘ |
| addresses |
allocation of control in firms
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make-or-buy decisions ⓘ trade-off between integration and non-integration ⓘ |
| assumes |
contracts are incomplete
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parties cannot specify all future contingencies in contracts ⓘ |
| author | Oliver Hart NERFINISHED ⓘ |
| coAuthor | Sanford J. Grossman NERFINISHED ⓘ |
| contribution |
derives conditions under which integration is optimal
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formalizes the property-rights theory of the firm ⓘ links asset ownership to ex post bargaining outcomes ⓘ |
| coreConcept |
firm boundaries
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incomplete contracts ⓘ investment incentives ⓘ lateral integration ⓘ ownership of assets ⓘ residual control rights ⓘ vertical integration ⓘ |
| explains |
determinants of optimal lateral integration
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determinants of optimal vertical integration ⓘ how allocation of asset ownership affects bargaining power ⓘ how ownership structure affects ex ante investment incentives ⓘ |
| field |
contract theory
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economics ⓘ organizational economics ⓘ theory of the firm ⓘ |
| framework | incomplete contracting model ⓘ |
| influenced |
corporate governance research
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industrial organization ⓘ law and economics ⓘ modern theory of the firm ⓘ |
| language | English ⓘ |
| proposes | firms should own assets when ownership improves investment incentives more than it worsens counterparties’ incentives ⓘ |
| recognizedAs |
foundational work in property-rights theory
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seminal paper in organizational economics ⓘ |
| relatedTo | Grossman–Hart–Moore property-rights framework NERFINISHED ⓘ |
| shows |
integration can reduce hold-up problems for some parties
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integration can weaken investment incentives of non-owning parties ⓘ ownership matters when investments are relationship-specific ⓘ |
| theoreticalApproach | property-rights approach ⓘ |
| usedIn |
analysis of firm boundaries in supply chains
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analysis of vertical mergers ⓘ studies of public versus private ownership of assets ⓘ |
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.
Oliver Hart
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notableWork
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The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration
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