The Firm as a Collection of Assets

Research output: Contribution to journalArticlepeer-review


The thesis of this paper is that human capital is inalienable: it cannot be bought or sold. Control of physical capital provides the means by which one agent influences another. That is, the pattern of property rights over physical assets is important in the determination of incentives. Recent joint work with Oliver Hart uses this idea in two interrelated ways; see Hart and Moore (1990 and 1991). Viewing the firm as a collection of assets, our first paper analyses how the incentives of employees are affected by changes in ownership. In section 2, I present an extended example to show that the theory can explain some basic notions - e.g., why firms may initially have increasing returns, and then have decreasing returns. The analysis here assumes away wealth constraints. Once the need for firms to raise money is taken into account, the control of physical capital has another function - that of providing incentives to repay investors. This is the topic of section 3, which presents a simple variant of a model of debt taken from our second paper. I begin with a brief background discussion.
Original languageEnglish
Pages (from-to)493-507
Number of pages15
JournalEuropean Economic Review
Issue number2-3
Publication statusPublished - Apr 1992


Dive into the research topics of 'The Firm as a Collection of Assets'. Together they form a unique fingerprint.

Cite this