How Property Rights Matter to Firm Resource Investment: Evidence from China’s Property Law Enactment

Although property-rights theory has long been used to explain firms’ ownership of resources, research on the channels through which property rights affect heterogeneous firms’ investment in building resources remains scarce. Leveraging a property-law enactment in China, we find that strengthening property-rights protection leads private firms to make greater intangible and tangible asset investment compared with state-owned firms and that these effects are mediated by external equity and debt financing. Further, we unpack resource heterogeneity by explicating key differences between intangible and tangible assets, and we document an alignment between asset intangibility and financing approaches such that for intangible asset investment, equity plays a larger mediation role, whereas for tangible asset investment, debt’s mediating effect is greater. We contribute to the strategy literature by using property-rights theory to link together asset intangibility and financing approaches and by showing that the strength of property-rights protection affects firms’ resource investment and shapes firm heterogeneity.

The economic analysis of the evolution of public ownership

For the issue of public ownership has been the focus of academic debate, through the German industrial 4.0 concepts lead to “China’s industrial 2025 plan”, on the basis of property rights theory, this paper combines with the basic concept of public ownership combed the realization form of public ownership, the evolution in China, and discusses the realization form of socialist public ownership with Chinese characteristics.

The Agricultural and Industrial Revolutions in England and China: A View through the Lens of Dynamic Property Rights Theory

This article presents a dynamic land property rights theory based on the law of the limit to land productivity, and then uses this theory and a large amount of data to compare the history of the agricultural and industrial revolutions in England and China. The article finds that, in England, the arable land—especially sown land—per capita of the agricultural population trended downward before the Black Death, but after the Black Death, experienced a long-term upward trend. In China, however, over the same period, the sown area per capita of the rural population shrank. It is these opposing trends that account for the historical divergence between the economies of England and China. This article concludes that the agricultural and industrial revolutions in England, as well as England’s capitalist market and private property rights regime, are the result of the expansion of the sown area per capita of the agricultural population. The article also concludes that the claim that England’s capitalist system of markets and private property rights gave birth to its agricultural and industrial revolutions cannot be sustained.

The Locus of Innovation: A Literature Review

The most commonly asked question in the research of innovation is: what type of firms can innovate more productively, startups or established firms? A related question is: does the nature of innovation affect the comparative advantages of startups versus established firms? This paper reviews the literature on the locus of innovation from multiple perspectives, including explanations based on organizational capabilities, incentives and agency costs, transaction cost economics, and property rights theory. It seeks to provide an integrative view of the comparative advantages of startups versus established firms when handling innovation. Prior research on the locus of innovation has significant implications not only for the theory of innovation, but also for the theory of the firm. Most notably, integration is primarily motivated by coordination benefits and improved incentives for investment in non-human assets (Williamson, 1985; Grossman & Hart, 1986; and Hart & Moore, 1990). However, integration suffers from weaker incentives to invest in human assets (Holmstrom, 1989).

Vertical Integration and the Theory of the Firm

How do firms organize economic transactions? This question can be thought of as a question of firm boundaries or as a decision about a firm’s scope, encompassing the choice along a continuum of governance structures, including spot markets, short-term contracts, long-term contracts, franchising, licensing, joint ventures, and hierarchy (integration). Although there is no unified theory of vertical integration, transaction cost economics, agency theory, and more recently property rights theory have been influential not only in analyzing make-or-buy decisions but also in understanding “hybrid forms” or inter-firm alliances, such as technology licensing contracts, equity alliances, joint ventures, and the like. Before Coase’s work became widely known, whatever theoretical underpinnings there were of vertical integration were provided by applications of neoclassical theory. Here, the firm was viewed as a production function that utilized the most technologically efficient way to convert input into output. In particular, neoclassical theory was concerned primarily with market power and the distortions that it created in markets for inputs or outputs as the main driver of vertical integration. Hence, the boundaries of the firm—that is, where to draw the line between transactions that occur within the firm and those outside the firm—were irrelevant within this framework. It was Coase’s question “Why is there any organization?” that first suggested that price mechanisms in the market and managerial coordination within firms were alternative governance mechanisms. That is, the choice between these alternative mechanisms was driven by a comparative analysis of the costs of implementing either mechanism. Oliver Williamson built on Coase to provide the theoretical foundations for vertical integration by joining uncertainty and small numbers with opportunism in defining exchange hazards, and consequently established comparative analysis of alternative governance forms as the way to analyze vertical integration. More recently, property rights theory brought attention to ownership of key assets as a way to distinguish between the governance of internal organizations and those of market transactions, where ownership confers the authority to determine how these assets will be utilized. And lastly, agency theory also provides important building blocks for understanding contractual choice by placing the emphasis on the different incentives that vary with different contractual arrangements between a principal and its agent. Transaction cost economics, property rights theory, and agency cost theory complement one another well in explaining vertical integration in terms of alternative governance forms in a world of asymmetric information, bounded rationality, and opportunism. These theories have also been utilized in analyzing “hybrid” organizational forms, in particular strategic alliances and joint ventures. Together, vertical integration and alliances account for a significant part of corporate strategy decisions, and more research on the theoretical foundations as well as novel ways to apply these theories in empirical analyses will be productive avenues for a better understanding of firm behavior.

The Naturall Condition of Mankind

Upon what empirical basis did Hobbes make his claims about the ‘state of nature’? He looked to ‘the savage people in many places of America’ (Hobbes, 1976: 187). Most people now recognize Hobbes’s assertions about Native Americans as racist. And yet, as Widerquist and McCall argue in their book Prehistoric Myths in Modern Political Philosophy, the myth that life outside the state is unbearable and that life under the state is better remains the essential premise of two of the most influential Western political philosophies in the modern world – social contract theory (contractarianism) and property rights theory (propertarianism). Critiques of these philosophies are not new. But what is new, and exciting, about this book is that a political philosopher (Karl Widerquist) enlists an anthropologist (Grant S. McCall) to systematically debunk this founding myth on the basis of empirical evidence. Despite some confusion about the book's aims, the lack of attention to women and the risk of epistemic injustice, the results are fascinating and, I will argue, should prompt a methodological crisis for some schools of political philosophy.