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We model the effects of competition on managerial efficiency and isolate the agency effect of competition, present only in firms subject to agency costs, from the direct pressure effect of competition, which is present in all firms. Using a unique set of Canadian data that surveys both firms and their employees, we then evaluate the empirical significance of these two effects. We find that competition has a significant direct pressure effect as well as a significant agency effect. Both effects increase the importance firms place on quality improvements and cost reductions as well as on contractual incentives and employee effort. Copyright 2007 Blackwell Publishing Ltd..

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  • Jen Baggs & Jean-Etienne De Bettignies, 2007. "PRODUCT MARKET COMPETITION AND AGENCY COSTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 289-323, June.
  • Handle: RePEc:bla:jindec:v:55:y:2007:i:2:p:289-323

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    References listed on IDEAS

    1. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    2. Jean-Charles Rochet & Jean Tirole, 2014. "Platform Competition in Two-Sided Markets," CPI Journal, Competition Policy International, vol. 10.
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    11. Schiff, Aaron, 2003. "Open and closed systems of two-sided networks," Information Economics and Policy, Elsevier, vol. 15(4), pages 425-442, December.
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    Cited by:

    1. Ghosh, Arghya & Kato, Takao & Morita, Hodaka, 2017. "Incremental innovation and competitive pressure in the presence of discrete innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 1-14.
    2. Jovanovic, Dragan, 2012. "Partial Public Ownership and Managerial Incentives," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62039, Verein für Socialpolitik / German Economic Association.
    3. Michela Cella & Federico Etro, 2016. "Contract competition between hierarchies, managerial compensation and imperfectly correlated shocks," Journal of Economics, Springer, vol. 118(3), pages 193-218, July.
    4. Garen Markarian & Juan Santalo´, 2014. "Product Market Competition, Information and Earnings Management," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 41(5-6), pages 572-599, June.
    5. Liao, Li-Kai & Lin, Yi-Mien & Lin, Tsung-Wen, 2016. "Non-financial performance in product market and capital expenditure," Journal of Business Research, Elsevier, vol. 69(6), pages 2151-2159.
    6. Joseph A. Clougherty & Anming Zhang, 2009. "Domestic rivalry and export performance: theory and evidence from international airline markets," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 440-468, May.
    7. Jovanovic, Dragan, 2013. "Mergers, managerial incentives, and efficiencies," DICE Discussion Papers 88, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Jean-Etienne de Bettignies & Thomas W. Ross, 2010. "The Economics of Public–Private Partnerships: Some Theoretical Contributions," Chapters,in: International Handbook on Public–Private Partnerships, chapter 7 Edward Elgar Publishing.
    9. Ennasri, Ahmed & Willinger, Marc, 2014. "Incentives and managerial effort under competitive pressure: An experiment," Research in Economics, Elsevier, vol. 68(4), pages 324-337.
    10. repec:eee:indorg:v:52:y:2017:i:c:p:427-449 is not listed on IDEAS

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