Partner uncertainty and the dynamic boundary of the firm
We develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex-post. The model identifies a fundamental trade-off between (i) a “displacement externality” under non-integration, where a partner leaves a relationship even though his benefit is worth less...
| Main Authors: | , |
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| Format: | Journal article |
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American Economic Association
2017
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| _version_ | 1826268881375723520 |
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| author | Hellmann, T Thiele, V |
| author_facet | Hellmann, T Thiele, V |
| author_sort | Hellmann, T |
| collection | OXFORD |
| description | We develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex-post. The model identifies a fundamental trade-off between (i) a “displacement externality” under non-integration, where a partner leaves a relationship even though his benefit is worth less than the loss to the displaced partner, and (ii) a “retention externality” under integration, where a partner inefficiently retains the other. With more asset specificity, displacement externalities matter more and retention externalities less, so that integration becomes more attractive. Our model also shows that wealthy partners would want to commit to ex-post wealth constraints. |
| first_indexed | 2024-03-06T21:16:22Z |
| format | Journal article |
| id | oxford-uuid:3fedb572-ba6a-4fc2-9a45-30b839b3a82a |
| institution | University of Oxford |
| last_indexed | 2024-03-06T21:16:22Z |
| publishDate | 2017 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | oxford-uuid:3fedb572-ba6a-4fc2-9a45-30b839b3a82a2022-03-26T14:34:56ZPartner uncertainty and the dynamic boundary of the firmJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:3fedb572-ba6a-4fc2-9a45-30b839b3a82aSymplectic Elements at OxfordAmerican Economic Association2017Hellmann, TThiele, VWe develop a new theory of the dynamic boundary of the firm where asset owners may want to change partners ex-post. The model identifies a fundamental trade-off between (i) a “displacement externality” under non-integration, where a partner leaves a relationship even though his benefit is worth less than the loss to the displaced partner, and (ii) a “retention externality” under integration, where a partner inefficiently retains the other. With more asset specificity, displacement externalities matter more and retention externalities less, so that integration becomes more attractive. Our model also shows that wealthy partners would want to commit to ex-post wealth constraints. |
| spellingShingle | Hellmann, T Thiele, V Partner uncertainty and the dynamic boundary of the firm |
| title | Partner uncertainty and the dynamic boundary of the firm |
| title_full | Partner uncertainty and the dynamic boundary of the firm |
| title_fullStr | Partner uncertainty and the dynamic boundary of the firm |
| title_full_unstemmed | Partner uncertainty and the dynamic boundary of the firm |
| title_short | Partner uncertainty and the dynamic boundary of the firm |
| title_sort | partner uncertainty and the dynamic boundary of the firm |
| work_keys_str_mv | AT hellmannt partneruncertaintyandthedynamicboundaryofthefirm AT thielev partneruncertaintyandthedynamicboundaryofthefirm |