Cellini, Roberto and Lambertini, Luca and Sterlacchini, Alessandro (2009): Managerial incentive and the firms’ propensity to invest in product and process innovation.
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We study the product and process innovation choice of firms in which a managerial incentive à la Vickers (1985) is present. Taking a two-stage dynamic game approach, we show that managerial firms are led to over-invest in process innovation, as compared to standard profit-maximising firms, while they under-invest in product innovation. The reason is that process innovation allows to decrease cost, and this is consistent with a convenient increase in the production level. On the opposite, product innovation allows increasing price, which is in contrast with the taste for output expansion embodied in the objective function of firms run by managers. Preliminary empirical evidence on Italian companies suggests that in fact the managerial nature of firm associates with significantly smaller efforts in product innovation while the effect on process innovation is positive but non-significant.
|Item Type:||MPRA Paper|
|Original Title:||Managerial incentive and the firms’ propensity to invest in product and process innovation|
|Keywords:||Process innovation; Product innovation; R&D; Managerial incentive|
|Subjects:||O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives
D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Roberto Cellini|
|Date Deposited:||22. Jan 2009 12:48|
|Last Modified:||15. Feb 2013 19:55|
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