Allocation Of Ownership Rights Research Articles

The many faces of condominiums and various management structures − The Danish case

The concept of condominium in Denmark is traditionally associated with owner apartments used for residential purposes (individually owned by the resident). The condominium law translated from Danish: “Law of owner apartments” was primarily intended to support the housing market and was mainly introduced to allow renters to become owners of a rental apartment in a high-rise building, i.e., making it possible forthem to enter the housing market without having to invest in an (often more expensive) traditional house on a real property. However, the law also applies on other nonresidential rooms in a building, thus the expression, many faces, is appropriate. The ownership right to a condominium unit includes a share in all components of the common property. This share also includes the responsibility to pay for common expenses regarding the common components. In traditional high-rise (single-use) buildings the common components of the condominium property include e.g., the outer walls, roof, cellar and a staircase or an elevator. Because of the nature of (single-use) buildings it is often fair to say that all condominium units have an equal benefit of the common components. Thus, it is regarded as being fair that all condominium units contribute to expenses to maintain and renew those common components. Therefore, the condominium law is partly designed to support this benefit-all principle, and the allocation of rights and responsibilities is done mainly by using a co-ownership share, where each condominium unit’s share is calculated using the relative value and size of each condominium unit. The benefit-all principle does not consider the actual benefit of each condominium unit. However, the rise of mixed-use developments in Danish urban planning has made it necessary to further develop and customize the allocation of ownership rights in such mixed-use condominium schemes in order to specify the allocation of ownership rights and responsibilities of common components, mainly because it is not fair to accept that all units have the same benefit of the common components. Based on four case studies all representing mixed-use condominium developments we analyse various management structures used in Danish practice. In our conclusion we propose that condominiums are used broader than original intended for various non-residential purposes and in mixed-use developments. The effect of this, is more complicated condominium schemes that require a customized management structure and allocation of rights and restrictions of common components.

Strategy or Gluttony? The Allocation of Ownership Rights to Strategic Assets within the Firm

The creation and appropriation of value from strategic assets are at the heart of strategy. Despite extensive research on how and where value is created within multinational enterprises (MNEs), and the performance benefits from strategic assets, relatively little is known about the allocation of ownership rights within firms to strategic assets. Although MNEs can exploit international differences and allocate strategic asset ownership rights to income shielding locations, it often comes at the cost of shifting control and responsibility from value-creating subsidiaries. This study examines firms’ trade-offs in allocating ownership rights to strategic assets using a hand-collected confidential dataset on 102 MNEs on the types and locations of their strategic assets. The findings indicate that MNEs select locations based on tax and their need for coordination and regional expertise. We find evidence that MNEs are significantly likely to locate ownership of their strategic assets in regional hubs of expertise. However, MNEs with codifiable strategic assets are more likely to have ownership separated from value-creating activities and located in tax havens. The results also provide insight into when firms are not likely to engage in tax avoidance. When strategic assets are more difficult to monitor and control, firms are less likely to separate ownership from value-creating activities. As such, these findings imply that tax competition is not simply a “race to the bottom” in that there are factors that inhibit firms from fully capitalizing on tax policies. From a policy perspective, this research provides insight into the policies that can attract MNE location choice. The results suggest that, for policymakers, creating a hub of expertise might be a powerful tool for attracting MNE strategic assets.

Global Sourcing of Heterogeneous Firms: Theory and Evidence

This paper investigates the role of firm productivity in drawing firm boundaries in global sourcing. Our analysis focuses on how productivity affects the allocation of ownership rights between the headquarter of a firm and an intermediate input supplier (vertical integration vs. outsourcing), as well as the location of intermediate input production (offshore vs. domestic). Unlike previous work, we allow for a fully flexible productivity effect with varying magnitude and sign across different industries. Our estimation strategy is motivated by the canonical economic model of sourcing due to Antras & Helpman (2004). This model invokes the property rights theory of the firm in order to pin down firm boundaries as the outcome of an interaction between firm heterogeneity and the industry’s sourcing intensity (i.e. the importance of inputs sourced from suppliers relative to headquarter inputs). We demonstrate that, at the level of the firm, the model implies a productivity effect that varies not just in magnitude (and potentially non-monotonically), but also in sign with the sourcing intensity of the industry. To estimate the effects empirically, we use Spanish firm-level data from the Encuesta sobre Estrategias Empresariales (ESEE). We find a pattern of effects whereby productivity stimulates vertical integration in industries of low sourcing intensity, but favors outsourcing in industries of high sourcing intensity. Moreover, we find that productivity boosts offshoring throughout all industries, with the effect increasing monotonically in the sourcing intensity. Our results lend strong empirical support to the property rights view of the firm in the global economy.

Forest Carbon—Questions of Indigenous Rights and Market Forces

Abstract With the debate linking greenhouse gases and climate change increasingly shifting from the science arena into policy and finance, a number of issues are emerging around carbon trading, especially around forest carbon. Carbon sequestered in forests until recently was un-ownable. But who owns the carbon and who trades in what some are calling a new financial product are still highly contested questions. Allocation of ownership rights is hampering the transition of carbon from collectively owned ecosystem input to individually owned commodity. But should forest carbon become a financial product? This article examines the issue of carbon sequestered in forests and the global mechanisms to exploit it. Some of the consequences of distinguishing the carbon from the tree and building a multi-million dollar enterprise around this distinction are discussed, including carbon crime and the rebound effect.

Strategic Alliances: Trading Ownership for Capabilities

Increases in alliance activity between research‐intensive firms and incumbents is puzzling because it is challenging to contract upon highly uncertain R&D activities. Our paper extends prior research by exploring the relationship between firm capabilities and gains from trading ownership rights. This link is important because the allocation of ownership rights has been shown to influence alliance outcomes. Using data based on a survey of biotechnology firms, we find that both current and future capabilities provide strong explanatory power for understanding firm valuation of ownership rights. These ownership rights are ultimately allocated across firms in order to maximize their gains from trade.

The Determinants of Ownership Structure: Evidence from Brazilian Agricultural Cooperatives

ABSTRACTThe separation of ownership and control observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, nonprofits, and cooperatives. This separation gives rise to control and influence cost problems in cooperatives. However, it is not observed in all Brazilian agricultural cooperatives, where certain members have both residual claim and formal control rights. In this article, we examine the allocation of decision management and control rights and the determinants of ownership structure in a sample of Brazilian agricultural cooperatives. Using survey data, we employ multivariate regression techniques to empirically investigate the factors determining the allocation of ownership rights and the separation of ownership and control. Our findings do not lend strong support to agency theory, but they help inform research seeking to shed light on the determinants of decision rights allocation in agricultural cooperatives. [EconLit classification: Q130].

Determinants of ownership concentration in public firms: The importance of firm-, industry- and country-level factors

We analyze the relative importance of firm-, industry-, and country-level factors as determinants of the level of ownership concentration of firms. We apply hierarchical linear models to a sample of 900 firms from nine countries. Our models explain up to 28% of the variance in ownership concentration. The results show that firm- and country-level factors influence ownership concentration far more strongly than industry-level factors do. The institutional context in which companies operate has a relatively large effect on ownership concentration. Our results should spark further multi-level research on the relationship between environmental factors on the country level and the allocation of ownership rights.

Accounting for Carbon Flows: Comparing the Principles of the UNFCCC and the SEEA

The System of Environmental and Economic Accounting (SEEA) views CO2 sequestration as an ecosystem service. The Framework Convention on Climate Change (UNFCCC) allocates CO2 removals to forestry sectors, effectively enabling ownership and trade of sequestered carbon. Such ownership is not explicit in the SEEA. Moreover, interpretations of human inducement that are used to justify the classification of sequestered carbon as “anthropogenic” differ substantially between the UNFCCC and the SEEA. Accounting dissonances and uncertain ownership rules can affect industry perspectives on their operations, and ultimately competitive and strategic position. Problems surrounding the accounting for human-induced change and the allocation of ownership rights are likely to hamper the transition of carbon from collectively owned ecosystem input to individually owned commodity.

Who Should Control a Corporation? Toward a Contingency Stakeholder Model for Allocating Ownership Rights

A number of companies allocate ownership rights to stakeholders different from shareholders, despite the fact that the law attributes these rights to the equity holders. This article contributes to an understanding of this evidence by developing a contingency model for the allocation of ownership rights. The model sheds light on why companies, despite pressures from the law, vary in their allocation of ownership rights. The model is based on the assumption that corporations increase their chance to survive and prosper if the stakeholders supplying “critical contributions” receive the ownership rights. According to the model, “critical” contributions involve (1) contractual problems due to specific investments, long-term relationships, and low measurability; (2) the assumption of the uncertainty resting on the company; and (3) the supply of scarce and valuable resources. The model is dynamic because it also provides a basis for understanding why the allocation of ownership rights changes with time. Finally, the article presents the strategies companies can use to realize an efficient distribution of ownership rights among their stakeholders.

Pareto-Optimal Assignments by Hierarchical Exchange

A version of the Second Fundamental Theorem of Welfare Economics that applies to a money-free environment, in which a set of indivisible goods needs to be matched to some set of agents, is established. In such environments, trade can be identified with the set of hierarchical exchange mechanisms defined by Papai (2000). Papai (2000)'s result – that any such mechanism yields Pareto-optimal allocations – can be interpreted as a version of the First Fundamental Theorem of Welfare Economics for the given environment. In this note, I show that for any Pareto-optimal allocation and any hierarchical exchange mechanism one can find an initial allocation of ownership rights, such that the given Pareto-optimal allocation arises as a result of trade.

Determinants of Ownership Concentration: The Importance of Firm-, Industry- and Country-Level Factors

We analyze the relative importance of firm-, industry-, and country-level factors as determinants of the level of ownership concentration of firms. Building particularly on the work of Demsetz & Lehn (1985), Thomsen & Pedersen (1999; 1997, 1998), and La Porta et al.(1998, 1999), we develop hypotheses and test them on a sample of 900 firms from nine countries, using hierarchical linear models. Our models explain up to 31% of the variance in the ownership concentration of firms. The results show that the firm- and the country-level influence ownership concentration significantly, whereas industry-level factors play an almost negligible role in this respect. Specifically, we find that the institutional context in which companies operate has a surprisingly large effect on the level of ownership concentration. Our results should spark further multi-level research on the relationship between environmental factors on the country level and the allocation of ownership rights in firms.

Owning versus Renting: Do Courts Matter?

We develop a legal contract enforcement theory of the decision to own or lease. The allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement of contracts is costly, there will be a shift from arrangements that rely on such enforcement (such as a rental agreement) toward other forms that do not (such as direct ownership). We then test this prediction and show that costly enforcement of rental contracts hampers the development of the rental housing market in a cross section of countries. We argue that this association is not the result of reverse causation from a developed rental market to more investor protective enforcement and is not driven by alternative institutional channels. The results provide supportive evidence for the importance of legal contract enforcement for market development and the optimal allocation of property rights.

Determinants and performance effects of the allocation of ownership rights in consulting firms

AbstractThis paper provides a joint assessment of the antecedents and the performance consequences of the allocation of ownership rights in professional service firms (PSFs). Drawing on established economic theory, we argue that the efficiency implications of alternative ownership arrangements drive the allocation of ownership rights. We test our arguments using a sample of 119 large and medium‐sized consulting firms. The results confirm the significance of capital requirements, service standardization, business risk, and organization size as determinants of the allocation of ownership rights in these firms. We do not find ownership allocation per se to be a significant driver of performance. The results suggest that the optimal allocation of ownership rights is endogenously determined by the conditions under which consulting firms operate. Copyright © 2008 John Wiley & Sons, Ltd.

Fairness and the Optimal Allocation of Ownership Rights

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.

Optimal Allocation of Ownership Rights in Dynamic R&D Alliances

We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart and Moore. In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be concealed later. We characterize different scenarios in which the optimal ownership structure may change over time due to a trade-off between inducing know-how disclosure and ensuring maximum effort.

THE ALLOCATION OF OWNERSHIP RIGHTS IN CONSULTING FIRMS.

The article looks at the allocation of ownership rights in consulting firms. According to the article, in partnerships the ownership rights are given solely to insiders, or present employees of the firms. In the article several hypotheses are examined, including the larger a consulting firm, the greater the heterogeneity among employees, the higher the capital requirements, and the greater the operative risk of a consulting firm, the lower the chance of internal allocation of ownership rights will be.

Owning Versus Leasing: Do Courts Matter?

The authors develop a legal contract enforcement theory of the own versus lease decision. The allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement of contracts is costly, there will be a shift from arrangements that rely on such enforcement (such as a rental agreement) toward other forms that do not (such as direct ownership). The authors then test this prediction and show that costly enforcement of rental contracts hampers the development of the rental housing market in a cross-section of countries. They argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement and is not driven by alternative institutional channels. The results provide supportive evidence on the importance of legal contract enforcement for market development and the optimal allocation of property rights.

Do Courts Matter? Rental Markets and the Law

We argue that the allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement is costly, there will be a shift from contractual arrangements that rely on such enforcement (such as a rental agreement) towards other forms that do not (such as direct ownership). We then test this prediction on data on the rental housing market, and show that costly enforcement of rental contracts hampers the development of such a market in a cross-section of countries. We argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement. The results provide supportive evidence on the importance of contract enforcement for the development of financial and other markets.

Fairness and the Optimal Allocation of Ownership Rights

We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that subjects attain the most efficient ownership allocation despite starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.

Optimal allocation of ownership rights in dynamic R&D alliances

We explore the dynamic evolution of property rights regimes in R&D alliances using the incomplete contract approach pioneered by Grossman, Hart, and Moore. In contrast to the standard analysis, the productive asset is an excludable public good such as a patent. Moreover, both firms can decide whether to disclose their know-how and invest effort. Know-how that has once been released cannot be concealed later. We characterize different scenarios in which the optimal ownership structure may change over time due to a trade-off between inducing know-how disclosure and ensuring maximum effort.