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Competition, agency and productivity

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  • Mark Rogers

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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File URL: http://www.tandfonline.com/10.1080/1357151042000286447
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Bibliographic Info

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

Volume (Year): 11 (2004)
Issue (Month): 3 ()
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

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  1. Nickell, Stephen & Nicolitsas, Daphne & Dryden, Neil, 1997. "What makes firms perform well?," European Economic Review, Elsevier, vol. 41(3-5), pages 783-796, April.
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  10. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
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  12. George Symeonidis, 1996. "Innovation, Firm Size and Market Structure: Schumpeterian Hypotheses and Some New Themes," OECD Economics Department Working Papers 161, OECD Publishing.
  13. Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
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  16. Sanghoon Ahn, 2002. "Competition, Innovation and Productivity Growth: A Review of Theory and Evidence," OECD Economics Department Working Papers 317, OECD Publishing.
  17. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
  18. Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April.
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Cited by:
  1. Bulan, Laarni & Sanyal, Paroma & Yan, Zhipeng, 2010. "A few bad apples: An analysis of CEO performance pay and firm productivity," Journal of Economics and Business, Elsevier, vol. 62(4), pages 273-306, July.

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