The book addresses the entrepreneurial origin of the capitalist firm and its asymmetric contractual relationships between capitalists, workers, managers and entrepreneurs, and explains the origin of the firm by focusing on entrepreneurship. A hidden action model shows how assigning residual...

This paper investigates the optimal assignment of principalship in teams. We formalize a theory of the firm pioneered by Alchian and Demsetz [Am. Econ. Rev. 62 (1972) 777] using an approach in the spirit of Grossman and Hart [J. Pol. Econ. 94 (1986) 691]. Our theory makes a distinction between...