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The Effect of Adversity on Process Innovations and Managerial Incentives

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  • Benoit Dostie

    ()
    (IEA, HEC Montréal)

  • Rajshri Jayaraman

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 HEC Montréal, Institut d'économie appliquée in its series Cahiers de recherche with number 09-06.

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Length: 45 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:iea:carech:0906

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Cited by:
  1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series, CESifo Group Munich 2692, CESifo Group Munich.

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