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Organizational structure, strategic delegation and innovation in oligopolistic industries

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  • Evangelos Mitrokostas
  • Emmanuel Petrakis

Abstract

We 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 and market performance. Each firm's owner can either delegate to a manager both market competition and R&D investment decisions (full delegation (FD) strategy) or delegate the market competition decision alone (partial delegation (PD) strategy). We show that when the initial marginal cost is relatively high, universal FD emerges in equilibrium. Otherwise, an asymmetric equilibrium with one owner choosing an FD strategy and the other a PD strategy arises. Finally, universal PD can arise in equilibrium only if the competition is in prices.

Suggested Citation

  • Evangelos Mitrokostas & Emmanuel Petrakis, 2014. "Organizational structure, strategic delegation and innovation in oligopolistic industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(1), pages 1-24, January.
    • Handle: RePEc:taf:ecinnt:v:23:y:2014:i:1:p:1-24
    DOI: 10.1080/10438599.2012.746197
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    Cited by:

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    2. Evangelos Mitrokostas & Emmanuel Petrakis, 2014. "Organizational structure, strategic delegation and innovation in oligopolistic industries," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(1), pages 1-24, January.
    3. Alessandra Chirco & Caterina Colombo & Marcella Scrimitore, 2013. "Organizational Structure and the Choice of Price vs. Quantity in a Mixed Duopoly," Working Paper series 27_13, Rimini Centre for Economic Analysis.
    4. Shubhro Sarkar & Suchismita Tarafdar, 2018. "Investment choice with managerial incentive schemes," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2018-008, Indira Gandhi Institute of Development Research, Mumbai, India.
    5. Zhao, Kai & Wu, Wanshu, 2015. "Ambiguity Between Pirate Incentive And Collective Desirability Within Semi-Delegation Pattern," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(2), pages 259-279, December.
    6. Alessandra Chirco & Caterina Colombo & Marcella Scrimitore, 2014. "Organizational Structure and the Choice of Price versus Quantity in a Mixed Duopoly," The Japanese Economic Review, Japanese Economic Association, vol. 65(4), pages 521-542, December.
    7. Colombo, Stefano & Scrimitore, Marcella, 2018. "Managerial delegation under capacity commitment: A tale of two sources," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 149-161.
    8. Marcella Scrimitore, 2019. "Endogenizing managerial delegation: A new result under Nash bargaining and network effects," EERI Research Paper Series EERI RP 2019/15, Economics and Econometrics Research Institute (EERI), Brussels.
    9. Jean‐Baptiste Tondji, 2022. "Overconfidence and welfare in a differentiated duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 751-767, April.
    10. Chung-Hui Chou, 2023. "An analysis of managerial delegation in a market with vertically-integrated producer owning an essential input monopolistically," Review of Economic Design, Springer;Society for Economic Design, vol. 27(1), pages 247-265, February.
    11. Chrysovalantou Milliou & Apostolis Pavlou, 2013. "Upstream Mergers, Downstream Competition, and R&D Investments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 787-809, December.

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    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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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