Managerial ownership, entrenchment and innovation


Beyer, Mila ; Czarnitzki, Dirk ; Kraft, Kornelius


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URL: http://ub-madoc.bib.uni-mannheim.de/3173
URN: urn:nbn:de:bsz:180-madoc-31732
Document Type: Working paper
Year of publication: 2011
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: O32 G32 O31 ,
Subject headings (SWD): Belgien , Führungskraft , Mitbestimmung , Corporate Governance , Anreizsystem , Industrieforschung , Investition , Innovation
Keywords (English): Corporate governance , managerial ownership , entrenchment , innovation , R&D investments
Abstract: 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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Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.




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Beyer, Mila ; Czarnitzki, Dirk ; Kraft, Kornelius (2011) Managerial ownership, entrenchment and innovation. Open Access [Working paper]
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