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Management Control and Innovative Activity

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  • Czarnitzki, Dirk
  • Kraft, Kornelius

Abstract

This paper discusses theoretically the different incentives of managers versus firm owners to invest in innovative activities. There are opposing effects concerning R&D intensity in the manager-controlled firm. Our study on the determinants of R&D intensity presents empirical results concerning this question. A sample of German firms with 3,978 observations is used and it turns out that the owner-led firms invest less into R&D than the managerial firms. With respect to the managerled firms, expenditures on R&D depend on the control exerted. If capital shares are widely dispersed and managers are thus only controlled a little by owners, they invest more into R&D. Owner-led firms and managers who are strongly controlled have a very similar R&D intensity. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-68.

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Date of creation: 2000
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Handle: RePEc:zbw:zewdip:5350

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Keywords: Innovative Activity; Managerial versus Owner-led Firms; Incentives; Tobit Regression;

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References

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  1. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
  2. Kraft, Kornelius & Niederprum, Antonia, 1999. "Determinants of management compensation with risk-averse agents and dispersed ownership of the firm," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 17-27, September.
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  14. Robert Gibbons & Kevin Murphy, 1989. "Relative Performance Evaluation for Chief Executive Officers," Working Papers 628, Princeton University, Department of Economics, Industrial Relations Section..
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  17. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
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Citations

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Cited by:
  1. Kraft, Kornelius & Czarnitzki, Dirk, 2004. "On the Profitability of Innovative Assets," ZEW Discussion Papers 04-38, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Dirk Czarnitzki & Hanna Hottenrott, 2011. "R&D investment and financing constraints of small and medium-sized firms," Small Business Economics, Springer, vol. 36(1), pages 65-83, January.
  3. Czarnitzki, Dirk & Kraft, Kornelius, 2009. "Capital control, debt financing and innovative activity," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 372-383, August.
  4. Hottenrott, Hanna & Peters, Bettina, 2012. "Innovative capability and financing constraints for innovation: More money, more innovation?," ZEW Discussion Papers 09-081 [rev.2], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Andrea Caggese, 2006. "Entrepreneurial risk, investment and innovation," Economics Working Papers 1011, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Bastiaan M. Overvest & Jasper Veldman, 2008. "Managerial incentives for process innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 539-545.
  7. Sellami Basma, 2008. "Gouvernement D'Entreprise Et Investissement En R&D : Une Etude Sur Le Sbf 250," Post-Print halshs-00525983, HAL.
  8. Volker Zimmermann, 2003. "Innovationsaktivitäten von kmU im verarbeitenden Gewerbe: Was zeichnet Imitatoren und originäre Innovatoren aus?," ZEW Discussion Papers 03-37, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  9. Väänänen, Lotta, 2003. "Agency Costs and R&D: Evidence from Finnish SMEs," Discussion Papers 859, The Research Institute of the Finnish Economy.
  10. Ghosh, Saibal, 2006. "R&D in Indian public enterprises: An assessment," MPRA Paper 32073, University Library of Munich, Germany.
  11. Joel Stiebale & Frank Reize, 2008. "The Impact of FDI on Innovation in Target Firms," Ruhr Economic Papers 0050, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  12. Jirjahn, Uwe & Kraft, Kornelius, 2006. "Do Spillovers Stimulate Incremental or Drastic Product Innovations? Hypotheses and Evidence from German Establishment Data," ZEW Discussion Papers 06-23, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. H. T. Tran & E. Santarelli, 2013. "Revisiting Italian Emigration Before the Great War: A Test of the Standard Economic Model," Working Papers wp909, Dipartimento Scienze Economiche, Universita' di Bologna.

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