This really comes down to the question of what ownership structure to choose.

The GHM model mainly discusses three main ownership structures: (1) non-consolidated type, A and B own their own material assets; (2) type one merger, A owns all material assets; (3) type two merger, B

Own all material assets.

Among them, categories (2) and (3) are two different forms of integration, that is, two different types of mergers, or two types of ownership structures.

Comparing the size of the dedicated investment brought by the two merger forms, and thus the greatest total income, the ownership structure of that merger type is more effective.

The structure of the analysis is that if B's ??human capital investment is the most important, then the first-type merger is the optimal ownership structure; if A's human capital investment is the most important, then the second-type merger's ownership structure is the most optimal.

The reason is that complementary assets should be owned by one person to be efficient, because this can avoid the efficiency loss caused by blackmail.

The owner of human capital cannot become the owner of the enterprise because the contracting parties in the merger transaction are considered to be a mixture of human capital and physical capital. Due to the prohibition of slavery, the ownership of human capital is non-transferable, so only what is purchased is

Physical assets can be placed under consolidated ownership.

This explanation also answers the question of the source of "authority" in enterprises that Coase raised but did not demonstrate.

Since human capital and non-human capital combine to form an enterprise, the original value of human capital is destroyed after leaving the enterprise, so human capital is "threatened". Therefore, the owners of non-human capital can control human capital, which is the source of "authority".

Since both parties possess both human capital and physical capital, after B acquires A (or A acquires B), B becomes the owner of the business. Why can't A (or B) be the owner?

It turns out that there are different types of human capital: human capital with decision-making power has different importance than technical human capital.

Generally speaking, the human capital of top managers is more important to the creation of corporate value, because giving ownership to employees, although they also have human capital, will not have much effect on increasing corporate value.

If the human capital of both parties is not relationship-specific (complementary), or the material assets are competitive, and the cost of merger may be greater than the cost of market transactions, then the non-merger ownership structure is optimal (Hart, 1998, P5658).

The above model mainly discusses the issue of vertical integration, that is, merger.

This theory can also be used to explain the origins and boundaries of enterprises.

In the model, if A and B are two enterprises, it is a merger; if A and B are regarded as two small commodity producers, the "merger" process is the origin of the enterprise.

In the 1990 model (HartMoore, 1990), the above model was developed into a general model of asset ownership with multiple agents.

But this general model does not change the basic assumptions and conclusions of the two-person model, but is just an extension of the two-person model.

Due to space limitations, this will not be discussed in detail.

The criticism and main theoretical contribution of the GHM model to previous theories. In 1937, Ronald H. Coase, one of the representatives of the New Institutional School, published the article "The Nature of the Enterprise" and established the category of "transaction costs", marking the birth of modern enterprise theory.

The successors of this theory show differences from the original theory and each other in many aspects, but because they all agree that the enterprise is a nexus of contracts, it is called the "contract theory of the enterprise."

Among them, it is divided into: team theory (Armen Alchian and Harold Demsetz), principal-agent theory (Wilson, etc.), transaction cost theory (Olive Williamson and Benjamin Klein, etc.), indirect pricing theory (Zhang Wuchang, Yang Xiaokai, and Huang Youguang), incomplete

Contract theory (Olive Williamson and Benjamin Klein, Grossman and Hart, Hart and Moore), etc.

It can be seen that the GHM model is an important branch of transaction costs and incomplete contract theory.

The theory of the firm pioneered by Coase raises questions that neoclassical economics ignores: Why do firms appear?

Coase believes that because market transactions use the price mechanism to allocate resources, this transaction has costs, that is, there are so-called "transaction costs"; by using "authority" to allocate resources within an organization (enterprise), transaction costs can be saved

, thus forming an enterprise.

There are also transaction costs within the enterprise organization. When the marginal cost of organizing transactions within the enterprise organization is equal to the cost of completing the transaction in the market, the enterprise reaches its boundary with the market.

The transaction cost theory was developed by Williamson et al. and introduced three key assumptions: bounded rationality, opportunism, and asset specificity.

Due to bounded rationality, it is impossible for both parties to sign a complete contract beforehand; the incompleteness of the contract gives both parties the ability to engage in opportunistic behavior to increase their share of quasi-rent, leading to a loss of efficiency in market transactions.

Williamson's theory uses the "blackmail problem" to explain the source of Coase's transaction costs.