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Governance Structure, Technical Change and Industry Competition

Mattia Guerini, Philipp Harting and Mauro Napoletano ()
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Philipp Harting: Bielefeld University

No 2020-49, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

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 possible 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.

Keywords: Governance structure; industry dynamics; competition; technical change (search for similar items in EconPapers)
JEL-codes: G34 L22 M12 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-11
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com, nep-cse, nep-hme, nep-ino, nep-ore and nep-tid
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Working Paper: Governance structure, technical change and industry competition (2020) Downloads
Working Paper: Governance structure, technical change and industry competition (2020) Downloads
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