Affiliation:
1. Tiomkin School of Economics Reichman University Herzliya Israel
Abstract
AbstractThis paper examines whether partial ownership of a trading partner can alleviate hold‐up problems and promote relationship‐specific investments. Unlike a silent financial interest, which does not give the owner control over the partner and promotes both parties' investments, partial control over the partner could reduce the partner's investment and lead the owner to overinvest, thereby decreasing the joint surplus. The inability of the owner to restrain himself from abusing his control limits the effectiveness of partial ownership. An analysis of the control environment should be part of the empirical analysis of partial ownership and the assessment of its potential benefits by competition authorities.
Subject
Management of Technology and Innovation,Strategy and Management,Economics and Econometrics,General Business, Management and Accounting,Colloid and Surface Chemistry,Physical and Theoretical Chemistry