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Manager Delegation, Owner Coordination and Firms’ Investment in Automation

Author

Listed:
  • Stadler Manfred

    (School of Business and Economics, University of Tübingen, Tuebingen, Germany)

  • Unsorg Maximiliane

    (School of Business and Economics, University of Tübingen, Tuebingen, Germany)

Abstract

This paper studies the combined effects of mixed ownership structures and manager delegation on firms’ investment in automation processes in a multi-stage triopoly game. We show that, in accordance with empirical evidence, firms owned by common shareholders invest less in automation and realize lower profits compared to a firm owned by independent shareholders. Direct collusion of owners in terms of coordinated investment increases the profits, the one of the independent firm even more than the profits of the commonly owned firms. Delegation of operational decisions to managers results in higher investment and lower profits. In markets with favorable technological opportunities for automation, common ownership combined with manager delegation leads to the highest social welfare.

Suggested Citation

  • Stadler Manfred & Unsorg Maximiliane, 2022. "Manager Delegation, Owner Coordination and Firms’ Investment in Automation," Review of Economics, De Gruyter, vol. 73(2), pages 159-182, August.
    • Handle: RePEc:lus:reveco:v:73:y:2022:i:2:p:159-182:n:2
    DOI: 10.1515/roe-2022-0029
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    More about this item

    Keywords

    manager compensation; common ownership; cost-reducing investment;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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