Governance and Control for Firms in Transition

Abstract

This paper provides a very brief review of the corporate governance literature, pointing out some of its problems and shortcomings. We then redefine the firm as a nexus of investments, rather than a nexus of contracts. With this new view, the claims of many of the firm’s participants become more clearly focused. Additionally, attention is directed away from shareholders and toward the providers of firm-specific resources important to competitive advantage. Using the nexus of investments perspective, we consider the case of firms in transition – defined as firms that are making discontinuous changes in their nexus of investments. Most frequently, these firms seek outside capital, but they also often seek outside executives, new suppliers, and new partners. We develop a set of propositions that refine our nexus of investments perspective among firms in transition, and to guide research in corporate governance generally and firms in transition specifically.

Keywords: Corporate Governance, Nexus of Investment, Strategy

JEL Classification: M00, M1