Abstract

Transactions take place in the rm rather than in the market because the rm o ers agents who make speci c investments power. Past literature emphasizes the allocation of ownership as the primary mechanism by which the rm does this. Within the contractibility assumptions of this literature, we identify a potentially superior mechanism, the regulation of access to critical resources. Access can be better than ownership because: i) the power agents get from access is more contingent on them making the right investment; ii) ownership has adverse e ects on the incentive to specialize. The theory explains the importance of internal organization and third party ownership. A preliminary version of this paper circulated with the title \Implicit Property Rights in a Theory of the

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