Organizational structure, strategic delegation and innovation in oligopolistic industries
AbstractWe endogenize firms’ organizational structures in a homogenous goods duopoly where firms invest in cost reducing R&D and compete in quantities, and examine their impact on R&D efforts, market performance and social welfare. Each firm’s owner can either delegate to a manager both market competition and R&D investment decisions (Full Delegation strategy) or delegate the market competition decision alone (Partial Delegation strategy). We show that when the initial marginal cost is relatively high, Universal Full Delegation emerges in equilibrium. Otherwise, an asymmetric equilibrium with one owner choosing a Full Delegation strategy and the other a Partial Delegation strategy arises. Welfare is always higher in the asymmetric equilibrium configuration, thus, market and societal incentives are not always aligned. Finally, Universal Partial Delegation can arise in equilibrium only if goods are poor substitutes or if competition is in prices.
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Bibliographic InfoPaper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2011/09.
Length: 45 pages
Date of creation: 2011
Date of revision:
Organizational Structure; Strategic Delegation; Innovation; Oligopolistic Industries;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
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