Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18279
Authors: 
Zhang, Zhentang
Year of Publication: 
2002
Series/Report no.: 
DIW-Diskussionspapiere 295
Abstract: 
This paper investigates the strategic value of the managerial incentive scheme in affecting firms' incentive in R&D investment and their product market activities. Firstly, we find that in Cournot-quantity competition, owners strategically assign a non-profit-maximization objective to their managers. Consequently, managers in a delegation game invest more in cost-reducing R&D, and have higher output, lower prices and lower profits, as compared to profit-maximizers in an owner-run game. Secondly, we find that R&D collusion induces owners in a delegation game to choose more aggressive managerial incentives as compared to R&D competition, which in turn leads to increased R&D investment, reduced product prices and increased profits.
Subjects: 
Strategic Delegation
Managerial Incentives
R&D competition and R&D collusion
JEL: 
O32
L22
D20
C72
Document Type: 
Working Paper

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