Managerial Incentives, Innovation and Product Market Competition
AbstractThis paper investigates the strategic value of the managerial incentive scheme in affecting firms' incentive in R&D investment and their product market activities. Firstly, we find that in Cournot-quantity competition, owners strategically assign a non-profitmaximization objective to their managers. Consequently, managers in a delegation game invest more in cost-reducing R&D, and have higher output, lower prices and lower profits, as compared to profit-maximizers in a owner-run game. Secondly, we find that R&D collusion induces owners in a delegation game to choose more aggressive managerial incentives as compared to R&D competition, which in turn leads to increased R&D investment, reduced product prices and increased profits.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 295.
Length: 20 p.
Date of creation: 2002
Date of revision:
Strategic Delegation; Managerial Incentives; R&D competition and R&D collusion.;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D20 - Microeconomics - - Production and Organizations - - - General
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-08-19 (All new papers)
- NEP-LAB-2002-08-19 (Labour Economics)
- NEP-TID-2002-08-19 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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