Who is in charge? A property rights perspective on stakeholder governance

Debates on “shareholder” and “stakeholder” approaches to corporate governance often get bogged down in competing normative claims about economic rent streams, entitlements of different group members, fairness, and similar distributional issues. These concerns are important, but core economic issues in shareholder−stakeholder debates revolve around the positive analysis of property rights, transaction costs, ownership, and control. Going beyond the stylized assumptions of neoclassical economics, which assume away co−investment by the firm’s transactional and contractual partners, we show how theories of implicit and explicit contracting help us understand better joint investments and the creation of joint value. We call on scholars of Strategic Organization to embrace more robust theories of the firm and interfirm relations that take seriously the complex web of investments and residual claims that characterize team production and co−created value. Published: 2012 URL: http://www.business.illinois.edu/Working_Papers/papers/12−0102.pdf Who is in charge? A property rights perspective on stakeholder governance Peter G. Klein Associate Professor, Division of Applied Social Sciences, & Director, McQuinn Center for Entrepreneurial Leadership University of Missouri Columbia, MO 65211 Adjunct Professor, Norwegian School of Economics and Business Administration Phone: (573) 882-7008 [email protected] Joseph T. Mahoney Professor of Business Administration Caterpillar Chair of Business, & Director of Graduate Studies, Department of Business Administration College of Business University of Illinois at Urbana-Champaign Champaign, IL 61820 Phone: (217) 244-8257 [email protected] Anita M. McGahan Professor and Rotman Chair in Management Rotman School of Management, University of Toronto Toronto, ON M5S 3E6, Canada Senior Institute Associate, Institute for Strategy & Competitiveness, Harvard University Phone: (416) 978-6188 [email protected] Christos N. Pitelis Director, Centre for International Business and Management Judge Business School University of Cambridge Cambridge, CB2 1AG, UK Phone: 44 (0) 1 223 339618 [email protected]