On the Role of Investments and the Nature of Residual Control Rights
Abstract: Using the transaction as originally formulated by John R. Commons as the unit of analysis (Oliver Williamson recognizes that Commons’ notion of transaction is the basic unit of analysis of transaction cost economics), in this paper I illustrate three results: (i) how specific investments can be a safeguard from, rather than the cause of, opportunistic behaviors, (ii) if and when residual control rights can reduce, rather than increase, incentives to invest, and (iii) why the standard definition of residual control right as right in personam is too narrow.
