The prevailing theory of the firm demonstrates that ownership by dispensable, outside parties is inefficient relative to ownership by productive agents. To better understand observed patterns of ownership, I analyze markets for ownership, demonstrating that outside parties will often become asset owners. Outside parties earn rents only from ownership, whereas productive agents can earn rents even as nonowners. Given that their contribution is complementary with other productive agents, this mutes their willingness to pay for ownership relative to outsiders. The main conclusion is that the nature of ownership markets stands alongside incentives as an important predictor of firm boundaries.
