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Managerial ownership, entrenchment and innovation
Beyer, Mila
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Czarnitzki, Dirk
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Kraft, Kornelius
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URL:
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http://ub-madoc.bib.uni-mannheim.de/3173
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URN:
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urn:nbn:de:bsz:180-madoc-31732
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Document Type:
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Working paper
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Year of publication:
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2011
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The title of a journal, publication series:
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None
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Publication language:
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English
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Institution:
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Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
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MADOC publication series:
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Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
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Subject:
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330 Economics
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Classification:
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JEL:
O32 G32 O31 ,
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Subject headings (SWD):
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Belgien , Führungskraft , Mitbestimmung , Corporate Governance , Anreizsystem , Industrieforschung , Investition , Innovation
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Keywords (English):
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Corporate governance , managerial ownership , entrenchment , innovation , R&D investments
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Abstract:
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Principle-agent theory suggests managers might under-invest into R&D for reasons of risk tied to project failure, such as reduced remuneration and job loss. However, managers might over-invest into innovation for reasons of growth implying higher remuneration, power and prestige. Using a sample of 1,406 Belgian firms, we find, first, that managers holding no company shares under-invest into R&D compared to owners giving rise to the risk argument. Second, we find an inverse u-shaped relationship between the degree of managerial ownership and R&D. Thus, managers become entrenched, i.e. powerful enough to pursue their own interests. When entrenched, managers do not fear detrimental effects of risky innovation projects on their career, and hence tend to over-invest into innovation.
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Additional information:
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 | Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt. |
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