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The effect of adversity on process innovations and managerial incentives

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  • Benoit Dostie

    (HEC Montréal)

  • Rajshri Jayaraman

    (ESMT European School of Management and Technology)

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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Bibliographic Info

Paper provided by ESMT European School of Management and Technology in its series ESMT Research Working Papers with number ESMT-09-002.

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Length: 44 pages
Date of creation: 02 Jun 2009
Date of revision:
Handle: RePEc:esm:wpaper:esmt-09-002

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Keywords: process innovation; managerial incentives; efficiency; natural experiment;

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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development, Boston University, Institute for Economic Development 105, Boston University, Institute for Economic Development.
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  8. Wooldridge, Jeffrey M. & Imbens, Guido, 2009. "Recent Developments in the Econometrics of Program Evaluation," Scholarly Articles 3043416, Harvard University Department of Economics.
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  13. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
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Cited by:
  1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 20906, Hamburg University, Department of Economics.

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