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Governance structure, technical change and industry competition

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  • Mattia Guerini

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Philipp Harting
  • Mauro Napoletano

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

We develop a model to study the impact of corporate governance on firm investment decisions and industry competition. In the model, governance structure affects the distribution of shares among short- and long-term oriented investors, the robustness of the management regarding pos- sible stockholder interference, and the managerial remuneration scheme. A bargaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between corporate governance and firm's optimal investment strategy and we study how different governance structures shape technical progress and the degree of competition over the industrial life cycle. Numerical simulations of a calibrated set-up of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation.

Suggested Citation

  • Mattia Guerini & Philipp Harting & Mauro Napoletano, 2020. "Governance structure, technical change and industry competition," SciencePo Working papers Main hal-03374377, HAL.
    • Handle: RePEc:hal:spmain:hal-03374377
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03374377
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    More about this item

    Keywords

    governance structure; industry dynamics; competition; technical change;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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