Residual rights of control emerge from the impossibility of crafting, implementing and enforcing
complete contracts, especially in the case of complex, dynamic transactions. Since all contracts
are unavoidably incomplete, it is the residual right of control over an asset that defines who is the
“owner” of that asset (Grossman and Hart). According to the incomplete contract theory of the
firm, the assignment of control rights (and hence ownership) is dictated by ex ante investment
incentives of contracting parties. The theory predicts that residual rights of control are assigned
to agents making relationship specific investments whose quasi-rents are under risk from hold-up
behavior.