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Competition, agency and productivity

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Author Info
MARK ROGERS

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Abstract

This article tests a set of hypotheses relating to agency and Schumpeterian views on how competition affects performance. A survey data set of Australian workplaces is used, with the change in labour productivity as the dependent variable. The results show strong support for the idea that intense competition raises productivity growth in managerial workplaces, but not in non-managerial workplaces (i.e. where the principal owner also works). Testing the agency theories in more detail, we find no evidence that the number of competitors, the price elasticity of demand or a proxy for bankruptcy (pre-tax losses) are the mechanisms behind the process. For non-managerial workplaces the results indicate support for the idea that greater demand uncertainty reduces productivity growth. In contrast, for managerial workplaces, greater demand uncertainty tends to raise productivity growth.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 11 (2004)
Issue (Month): 3 (November)
Pages: 349-367
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Handle: RePEc:taf:ijecbs:v:11:y:2004:i:3:p:349-367

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Related research
Keywords: Competition Agency Schumpeterian Productivity JEL Classification: L1

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References listed on IDEAS
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  3. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring. [Downloadable!] (restricted)
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  12. Hagedoorn, John, 1996. "Innovation and Entrepreneurship: Schumpeter Revisited," Industrial and Corporate Change, Oxford University Press, vol. 5(3), pages 883-96.
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  14. Harry Bloch & James Ted McDonald, 2000. "Import Competition and Labour Productivity," Melbourne Institute Working Paper Series wp2000n09, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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  16. Bronwyn H. Hall & Jacques Mairesse, 1995. "Exploring the Relationship Between R&D and Productivity in French Manufacturing Firms," NBER Working Papers 3956, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  18. Rachel Griffith, 2001. "Product market competition, efficiency and agency costs: an empirical analysis," IFS Working Papers W01/12, Institute for Fiscal Studies. [Downloadable!]
  19. Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Blackwell Publishing, vol. 64(2), pages 191-213, April. [Downloadable!] (restricted)
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  20. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law & Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  21. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July. [Downloadable!] (restricted)
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