Property Rights, Owner-Management, and Value Creation

Item Type Journal paper
Abstract

Building on property rights theory, we explore the relationship among property rights, owner-management, and value creation in private firms. We suggest that property rights in the hands of owner-managers create strategic, incentive, and commitment benefits that facilitate value creation. However, the self-incentivizing nature of property rights engenders three control hazards —those related to reliability, egocentrism, and succession—that threaten stakeholder welfare. In order to mitigate these hazards, owner-managers must establish credible governance. We discuss four governance mechanisms often found in owner-managed firms: commitment to social control, delegation of authority to managers, submission to the hierarchy of a board, and partial transfer of ownership. Although these mechanisms help mitigate control hazards, they also constrain the value-generating benefits of owner-management. Owner-managers thus face control dilemmas when determining how to best govern their firms. Our theory sheds new light on the relationship between property rights and value creation, and lays a foundation for exploring the benefits and liabilities of owner-management.

Authors Schulze, William S. & Zellweger, Thomas Markus
Journal or Publication Title Academy of Management Review
Language English
Subjects business studies
HSG Classification contribution to scientific community
HSG Profile Area Global Center for Entrepreneurship + Innovation
Refereed Yes
Date 2020
Publisher Academy of Management
ISSN 0363-7425
Publisher DOI 10.5465/amr.2018.0377
Depositing User Prof. Dr. Thomas Markus Zellweger
Date Deposited 12 Feb 2020 07:02
Last Modified 02 Jun 2020 14:39
URI: https://www.alexandria.unisg.ch/publications/259344

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Citation

Schulze, William S. & Zellweger, Thomas Markus (2020) Property Rights, Owner-Management, and Value Creation. Academy of Management Review, ISSN 0363-7425

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https://www.alexandria.unisg.ch/id/eprint/259344
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