Managerial Incentives, Innovation and Product Market Competition
This paper investigates the strategic value of the managerial incentive scheme in affecting firms' incentive in R&D investment and their product market activities. Firstly, we find that in Cournot-quantity competition, owners strategically assign a non-profitmaximization objective to their managers. Consequently, managers in a delegation game invest more in cost-reducing R&D, and have higher output, lower prices and lower profits, as compared to profit-maximizers in a owner-run game. Secondly, we find that R&D collusion induces owners in a delegation game to choose more aggressive managerial incentives as compared to R&D competition, which in turn leads to increased R&D investment, reduced product prices and increased profits.
|Date of creation:||2002|
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- Fershtman, Chaim & Judd, Kenneth L, 1987.
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- Katz, Michael L., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Department of Economics, Working Paper Series qt79b870w0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Michael L. Katz., 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," Economics Working Papers 91-172, University of California at Berkeley.
- Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen. Full references (including those not matched with items on IDEAS)
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