The Origin of the Capitalist Firm

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Focusing on the entrepreneurial origin of capitalist firms, the book explores the asymmetric contractual relationships among capitalists, workers, managers, and entrepreneurs. It employs models to illustrate how assigning residual claims to entrepreneurs enhances incentives, how capital influences management selection, and how equilibrium relationships within firms depend on the distribution of abilities, wealth, and risk attitudes. Ultimately, it argues that capitalist firms are more efficient by ensuring that the most entrepreneurial individuals are in control, leading to better overall performance.