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Does Doing Badly Encourage Management Innovation?

Author

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  • Nickell, S.
  • Nicolitasa, D.
  • Patterson, M.

Abstract

In this paper we have undertaken an empirical analysis of the notion that firms introduce managerial innovations as a consequence of bad times, as in the "pit-stop" view of recessions. We first analyze a dynamic model of the firm and conclude that a competitive firm operating in a perfect capital market may well devote more of its employees' time to reorganization and other productivity improving activities during periods where the real output price or productivity is declining (e.g. recessions). We then investigate the hypothesis that a worsening of the firm's situation will lead to the introduction of productivity improving innovations of various kinds. Our individual company data tend to confirm this hypothesis with the single exception that firms tend to become more centralized when their real or financial position declines, despite the general view that it is decentralization which tends to improve the operation of a company in the long run. Copyright 2001 by Blackwell Publishing Ltd
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Suggested Citation

  • Nickell, S. & Nicolitasa, D. & Patterson, M., 1995. "Does Doing Badly Encourage Management Innovation?," Economics Series Working Papers 99175, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:99175
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    Keywords

    COMPETITION; ENTREPRISES; PRODUCTIVITY;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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