Outside Ownership as a Factor Input

This paper demonstrates how the outside ownership of assets used in production can improve outcomes. If outside ownership improves outcomes, and assets which implement the gains from outside ownership are scarce, then assets can have value conditional on outside ownership. A framework with a continuous creation and destruction of such assets is developed in a model of firm entry and exit. Assets under outside ownership behave like a factor input which earns a periodic return. By mapping a reduced form version of my model to the canonical Hopenhayn (1992) model of firm entry and exit, a micro-foundation for such a model is provided.