组织经济学与管理学ch09 Property rights theory

Figure: 9.13: Bargaining positions after the fundamental transformation
Payoff downstream party
-K 0
40
Payoff upstream Investor
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Shapley value.
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‘Asset ownership’ and ‘being essential / indispensable’ is captured by the Shapley
value.
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Transaction costs economics (Williamson)
Market
Vertical integration Governance structure choice
yes No
yes No
20
-10
0
20
50
0
yes
20 20
Upstream investor
No
Invest ?
The choice of investment (level of asset specificity) determines the bargaining position.
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Start with analysing the second and third stage of the game, while taking a certain
Division of quasi-surplus in governance structure
• Forward integration: 100 – 0 • Vertical integration: 50 – 50 • Backward integration: 0 – 100
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This case K = 0 reflects the Coase theorem!
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Suppose 0 < K 40.
M
FI
BI
Governance structure choice
Payoff downstream party
-K 0
Payoff upstream
40
investor
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Bargaining positions before fundamental transformation
(0, 0)
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M
FI
BI
Governance structure
choice < . >
Upstream investor
Y
N
Y
N
Y
N Invest?
20
0 40
00
0
20
00
0 40
0
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Every governance structure results in the efficient investment decision.
Allocating sufficient bargaining power to the investor provides enough confidence
that the investment will be recouped.
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(following Coase)
• Bargaining aspects • Financial limitations
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Three stage game
• First stage: Governance structure choice
and financial means (voting rights, power of board of directors, debt / equity ratio) to control insiders/agents?
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Emphasis in property rights theory
Economics and Management of Organisations:
Co-ordination, Motivation and Strategy
Chapter 9
Property rights theory
George Hendrikse
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Represent the above using figures instead of tree diagrams.
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Bargaining positions
(x, y) X: bargaining position upstream
Downstream party Honour contract ?
0 0
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Property rights theory
Grossman and Hart (1986) Hart and Moore (1990)
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Which governance structures result in the efficient investment decisions?
It depends on the level of K.
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Suppose K = 0.
investment decision.
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Suppose 40 < K 200.
M
FI
BI
Governance structure choice
Upstream investor
Y
N
Y
N
Y
N Invest ?
20- K/2 20+ K/2
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Example: Developing software
Cost of investment: 200 Sunk costs: K
Value of investment: 240
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• Second stage: Investment choice • Third stage: Honour contract choice
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The choice of governance structure determines the bargaining strength / power, which is summarised by the
first stage decision as given.
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Result
An investor is willing to worsen his bargaining position (by choosing K>0) when he is assigned a lot of bargaining
Bargaining positions after fundamental transformation
(-K, 0)
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Conclusion
A party investing in relationship specific assets deteriorates its ex
How is this done?
The choice of governance structure determines the distribution of bargaining
It is not consistent to assume that, in an integrated enterprise, people do
not behave opportunistically anymore.
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Strategic situation
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Questions in proຫໍສະໝຸດ erty rights theory
• What determines the size of the firm? • Who has decision authority in the firm? • How do outsiders employ organisational
Upstream investor
Y
N
Y
N
Y
N Invest ?
20- K/2 20+ K/2
0 40
0
0
0 -K
0
0 40+ K
0
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Conclusion
The governance structures <M> and <FI> result in the efficient
power in the choice of governance structure. (This gives him confidence that
he receives his money back.)
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Implication
An owner-manager invests more when he owns more assets.
post bargaining position.
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Why is an investor willing to deteriorate its ex post bargaining position?
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Firm
A collection of physical assets that are jointly owned.
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Ownership entails the possession of the residual decision rights.
Market
yes No yes No
Vertical integration Governance structure choice
Upstream investor
yes No
Invest ?
Downstream party Honour contract ?
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0 40
0
0
0 -K
0
0 40+ K
0
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Conclusion
Only governance structure <FI> results in the efficient investment
decision.
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investor Y: bargaining position downstream
investor
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Figure: 9.12: Bargaining positions before the fundamental transformation