Organizational structure, strategic delegation and innovation in oligopolistic industries

Evangelos Mitrokostas (e.mitrokostas@aade.gr) and Emmanuel Petrakis

No 2011/09, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: We endogenize firms’ organizational structures in a homogenous goods duopoly where firms invest in cost reducing R&D and compete in quantities, and examine their impact on R&D efforts, market performance and social welfare. Each firm’s owner can either delegate to a manager both market competition and R&D investment decisions (Full Delegation strategy) or delegate the market competition decision alone (Partial Delegation strategy). We show that when the initial marginal cost is relatively high, Universal Full Delegation emerges in equilibrium. Otherwise, an asymmetric equilibrium with one owner choosing a Full Delegation strategy and the other a Partial Delegation strategy arises. Welfare is always higher in the asymmetric equilibrium configuration, thus, market and societal incentives are not always aligned. Finally, Universal Partial Delegation can arise in equilibrium only if goods are poor substitutes or if competition is in prices.

Keywords: Organizational Structure; Strategic Delegation; Innovation; Oligopolistic Industries (search for similar items in EconPapers)
JEL-codes: L1 L22 O33 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Organizational structure, strategic delegation and innovation in oligopolistic industries (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2011/09

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