Incentives to innovate in response to competition: The role of agency costs

Evguenia Bessonova and Ksenia Gonchar

Economic Systems, 2017, vol. 41, issue 1, 26-40

Abstract: This paper investigates the role of managerial ownership and incentive payment as potential drivers of innovation decisions by firms and as shifters of the competition-innovation link in the Russian manufacturing industry, where poorly protected property rights and a path-dependent market structure (typical for many transition economies) lead to a variety of outcomes. We use recent survey-based microdata for nearly 2000 non-listed companies in Russia. Our results suggest that managerial ownership, which initially evolved as a means of protecting against and resisting dysfunctional institutions, may stimulate decisions to undertake R&D and risky product innovations. Further, managerial ownership and competition are complementary motivations for R&D and innovation. Incentive payment to hired managers is a positive commitment instrument but has no impact on the competition-innovation link.

Keywords: Agency costs; Managerial ownership; Incentive contract; Competition; Innovation (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:41:y:2017:i:1:p:26-40

DOI: 10.1016/j.ecosys.2016.09.002

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