Manager Delegation, Owner Coordination and Firms’ Investment in Automation

Manfred Stadler and Maximiliane Unsorg

Review of Economics, 2022, vol. 73, issue 2, 159-182

Abstract: This paper studies the combined effects of mixed ownership structures and manager delegation on firms’ investment in automation processes in a multi-stage triopoly game. We show that, in accordance with empirical evidence, firms owned by common shareholders invest less in automation and realize lower profits compared to a firm owned by independent shareholders. Direct collusion of owners in terms of coordinated investment increases the profits, the one of the independent firm even more than the profits of the commonly owned firms. Delegation of operational decisions to managers results in higher investment and lower profits. In markets with favorable technological opportunities for automation, common ownership combined with manager delegation leads to the highest social welfare.

Keywords: manager compensation; common ownership; cost-reducing investment (search for similar items in EconPapers)
JEL-codes: G32 L22 L24 M52 O31 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1515/roe-2022-0029

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