Review of Industrial Organization

, Volume 18, Issue 2, pp 201–218 | Cite as

Allocating Control over Firms: Stock Markets versus Membership Markets

  • Gregory K. Dow


The theory of the firm must explain howdecision-making powers are allocated between suppliersof capital and labor. Most large enterprises awardformal control to investors rather than workers. Isuggest here that this asymmetry can be traced in partto differences between stock markets and membershipmarkets as institutional mechanisms for allocatingcontrol over firms. The attractive theoreticalproperties of membership markets are examined, alongwith some factors that may account for their rarity inpractice. These practical difficulties help explainthe rarity of labor-managed firms themselves, alongwith various facts about their design, behavior, anddistribution across industries.

Control rights stock markets labor-managed firms 


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Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Gregory K. Dow
    • 1
  1. 1.Department of EconomicsSimon Fraser UniversityBurnabyCanada

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