The inheritance of contemporary financial economics invites us to consider financial stability as integral to a liberal market setting. The crisis however demonstrated that financial markets may prove highly dysfunctional in the absence of adequate mechanisms of regulation and governance. This...

What determines the quality of entrepreneurs? To address this question, the paper proposes a simple model of the interaction between individual workers’ decision to become entrepreneurs and established firms’ effort to keep their best workers and ideas. The main prediction from the model is...

I provide a justification of intellectual property rights as a source of static efficiency gains in manufacturing, rather than dynamic benefits from greater innovation. I develop a property-rights model of a supply relationship with two dimensions of non- contractible investment. In equilibrium,...

We reconsider the property rights approach to the theory of the firm based on incomplete contracts. We explore the implications of different degrees of relationship-specificity when there are two parties, A and B, who can make investments in physical capital (instead of human capital). If...

The standard property rights approach is focused on ex ante investment incentives, while there are no transaction costs that might restrain ex post negotiations. We explore the implications of such transaction costs. Prominent conclusions of the property rights theory may be overturned: A party...

We study how career concerns affect the dynamics of incentives in a multi-period contract, when the agent’s productivity is a stochastic function of his past productivity and investment. We show that incentives are stronger and performance is higher when the contract approaches its expiry...

We study how firm characteristics evolve from early business plan, to initial public offering, to public company for 49 venture capital financed companies. The average time elapsed is almost six years. We describe the financial performance, business idea, point(s) of differentiation, non-human...

This Paper presents a new approach to the theory of the firm by identifying factor complementarities as central to the determination of the firm’s boundaries. The factor complementarities may take a variety of forms: technological and informational complementarities, as well as economies of...

This Paper examines the optimal structure of management when a decision-maker must have a mass of information processed before making a decision. They can either delegate processing tasks inside their own organization, in which case they retain full authority over the agents, or they hand over...

This paper investigates a hitherto unexplored rationale for firms to enter into joint ventures. We model risky projects with autocorrelated productivity shocks as creating an option value of investing over time so that later investments benefit from the information revealed by the realization of...