This paper develops a theory in which individuals can use one of two types of human/social capital to enforce contracts: "Local capital" relies on families and other personal networks; "market capital" relies on impersonal market institutions such as auditors and courts. Local capital is...

This paper presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they...

This paper presents a model of an economy in which traders use social capital to reduce transaction costs. A key assumption is that there are two types of social capital: “village” capital relies on personal networks and repeat play to guarantee contracts; “market” capital relies on...

This paper presents a theory of the allocation of authority in an organization in which centralization is limited by the agent's ability to disobey the principal. We show that workers are given more authority when they are costly to replace or do not mind looking for another job, even if they...

This article examines the stock market response to acquisition announcements during and immediately after the conglomerate merger wave of the late 1960s. The main finding is that acquirer shareholders benefited from diversification acquisitions, which implies that diversification was not driven...