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R&D in a strategic delegation game revisited: a note

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  • Michael Kopel

    (Institute of Management Science, Vienna University of Technology, Theresianumgasse 27, A-1040 Vienna, Austria)

  • Christian Riegler

    (Department of Management Accounting, Vienna University of Economics and Business Administration, Althanstrasse 39-45, A-1090 Vienna, Austria)

Abstract

In this note we reconsider the paper of Zhang and Zhang (1997), published in Managerial and Decision Economics, who analyze a strategic delegation model with R&D spillovers in an imperfectly competitive market. We were motivated to study their setup by a puzzling result given in their paper: delegating the production and R&D decisions to managers is never beneficial for the owners of the firm. When we tried to understand the driving forces of this result, we found however that the findings of Zhang and Zhang (1997) are incorrect. We explain why their derivations are wrong and demonstrate via counterexamples that the main propositions in their paper do not hold. In addition, we show how the correct solution of this R&D model with spillovers can be obtained. Copyright © 2006 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 7 ()
Pages: 605-612

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Handle: RePEc:wly:mgtdec:v:27:y:2006:i:7:p:605-612

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. L. Lambertini, 2004. "Innovation and Managerial Incentives: A Tale of Two Systems," Working Papers 498, Dipartimento Scienze Economiche, Universita' di Bologna.
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Cited by:
  1. Florian Englmaier, 2010. "Managerial optimism and investment choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 31(4), pages 303-310.
  2. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
  3. Cellini, Roberto & Lambertini, Luca & Sterlacchini, Alessandro, 2009. "Managerial incentive and the firms’ propensity to invest in product and process innovation," MPRA Paper 12935, University Library of Munich, Germany.
  4. Rupayan Pal, 2009. "Delegation and emission tax in a differentiated oligopoly," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2009-007, Indira Gandhi Institute of Development Research, Mumbai, India.
  5. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, Springer, vol. 94(2), pages 143-166, July.
  6. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
  7. Pei-Cheng Liao, 2010. "Discriminatory input pricing and strategic delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 31(4), pages 263-276.
  8. Evangelos Mitrokostas & Emmanuel Petrakis, 2011. "Organizational structure, strategic delegation and innovation in oligopolistic industries," Working Papers, Economics Department, Universitat Jaume I, Castellón (Spain) 2011/09, Economics Department, Universitat Jaume I, Castellón (Spain).
  9. Bastiaan M. Overvest & Jasper Veldman, 2008. "Managerial incentives for process innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 29(7), pages 539-545.
  10. Evangelos Mitrokostas & Emmanuel Petrakis, 2008. "Do firms' owners delegate both short-run and long-run decisions to their managers in equilibrium?," Working Papers, University of Crete, Department of Economics 0815, University of Crete, Department of Economics.

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