We embed a simple incomplete-contracts model of organization design in a standard two-country perfectly-competitive trade model to examine how the liberalization of product and factor markets affects the ownership structure of firms. In our model, managers decide whether or not to integrate...

We develop a tractable model of the allocation of ownership and control within firms operating in competitive markets. The model shows how scarcity in the market translates into ownership structure inside the organization. It identifies a price-like mechanism whereby local liquidity or...