Schmalenbach Business Review

, Volume 17, Issue 2, pp 151–172 | Cite as

Third Parties and Specific Investments

  • Gerald Eisenkopf
  • Stephan NüeschEmail author
Original Article


Competitive advantage is typically based on a unique nexus of firm-specific investments that creates inimitable quasi-rents. Because it is impossible to write complete contracts on how to distribute the quasi-rents, stakeholders tend to underinvest in firm-specific assets to avoid the hold-up risk. This paper empirically tests the effect of third-party ownership on specific investments. Third-party ownership assigns the rights of residual control to independent fiduciaries. We conduct variations of the trust game, in which a third party, rather than the receiver, distributes the returns on investments. A randomly chosen third party with a fixed payment induces larger investments over time although the experimental design rules out reputation building. If receivers select the third parties, this benefit vanishes. If the third party receives a reward for the appointment, investments actually decrease. Investors (unwarrantedly) fear lower back transfers in such cases.


Third Parties Specific Investments Residual Control Experiment 

JEL Classification

D23 D33 D72 


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Copyright information

© Schmalenbach-Gesellschaft für Betriebswirtschaft e.V. (SG) 2016

Authors and Affiliations

  1. 1.Department of Economics, Junior Professorship in Personnel EconomicsUniversity of KonstanzConstanceGermany
  2. 2.Westfälische Wilhelms-Universität MünsterMünsterGermany

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