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The Effect of Adversity on Process Innovations and Managerial Incentives

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Author Info
Benoit Dostie ()
Rajshri Jayaraman ()

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Abstract

This paper asks whether adversity spurs the introduction of process innovations and increases the use of managerial incentives by firms. Using a large panel data set of workplaces in Canada, our identification strategy relies on exogenous variation in adversity arising from increased border security along the 49th parallel following 9/11. Our longitudinal difference-in-differences estimates indicate that firms responded to adversity by introducing new or improved processes, but did not change their use of managerial incentives. These results suggest that the threat of bankruptcy may provide impetus for improving efficiency.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2684.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2684

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Find related papers by JEL classification:
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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  1. Blundell, Richard & Griffith, Rachel & van Reenen, John, 1999. "Market Share, Market Value and Innovation in a Panel of British Manufacturing Firms," Review of Economic Studies, Blackwell Publishing, vol. 66(3), pages 529-54, July. [Downloadable!] (restricted)
  2. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!]
  3. Stephen G Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, 03. [Downloadable!] (restricted)
  4. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September. [Downloadable!]
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  5. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
  6. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  7. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," CEPR Discussion Papers 2128, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. DeFond, Mark L. & Park, Chul W., 1999. "The effect of competition on CEO turnover1," Journal of Accounting and Economics, Elsevier, vol. 27(1), pages 35-56, February. [Downloadable!] (restricted)
  9. 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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  10. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: An Inverted-U Relationship," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 701-728, May.
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  11. Vicente Cuñat & Maria Guadalupe, 2005. "How Does Product Market Competition Shape Incentive Contracts?," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1058-1082, 09. [Downloadable!] (restricted)
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  12. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, 04. [Downloadable!] (restricted)
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