The authors develop a property-rights model of firm boundaries that permits an analysis of the optimal allocation of ownership rights in a setting where production is sequential in nature and contracts are incomplete. They begin in Section 2 by developing a benchmark model of firm behaviour that isolates the role of the degree of `downstreamness' of a supplier in shaping organizational decisions. A key feature of their analysis is that the relationship-specific investments made by suppliers in upstream stages affect the incentives to invest of suppliers in downstream stages. The central result of the authors' model is that the optimal pattern of ownership along the value chain depends critically on whether production stages are sequential complements or substitutes. In Section 3, they show that these results are robust to alternative constructing and bargaining assumptions, and stem mainly from the sequential nature of production rather than the sequential nature of bargaining. In Section 4 and 5, they develop an empirical test for the main predictions of their framework.