Edited by Giovanni Battista Dagnino
Chapter 25: Does Firm Ownership Matter? Investors, Corporate Governance and Strategic Competitiveness in Privately-held Firms
Rosario Faraci and Wei Shen INTRODUCTION Modern capitalism relies primarily, but not exclusively, on various models of investor-owned firms (Hansmann, 1996) ranging from privately-held to public corporations. However, the spectrum of ownership forms is even broader since it includes also employee-owned, producer-owned, consumer-owned, government-owned and a various set of non-profit organizations. Nevertheless similar in their organizational structure, investor- and non-investor-owned firms are different in terms of rights exerted over the company and of using the relative power to protect these rights. For instance, publicly-held corporations and large cooperatives may be similar because they both deal with a dispersed ownership that delegates professional management to direct the firm, but they are significantly different from each other. Publicly-held firms are an example of investorowned companies where owners have the right to claim for residual earnings, while cooperatives are consumer-, producer- or employee-owned organizations where owners do not have the same right, because the distribution of profits is not allowed by law. In addition, cooperatives are a powerful example of workplace democracy that is becoming common in countries that have experienced the fall of communist regimes. According to these premises, the governance boundaries of the firm, or the scope of the governance functions, the use of internal and additional governance mechanisms and the nature of the governance ties, are affected and they, in turn, influence the firm’s competitiveness. Competitiveness is a multifaceted construct that affects organizational, strategic, financial, and economic aspects of the firm. When looking at the entire competitive process, ownership is...
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