Governance Structure, Technical Change and Industry Competition

31 Pages Posted: 1 Dec 2020

See all articles by Mattia Guerini

Mattia Guerini

Scuola Superiore Sant'Anna di Pisa; OFCE - SciencesPo

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics

Mauro Napoletano

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG); Observatoire Français des Conjonctures Economiques (OFCE); SKEMA Business School; Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM)

Date Written: November 23, 2020

Abstract

We develop a model to study the impact of corporate governance on firm investment decisions and industry competition. In the model, governance structure affects the distribution of shares among short- and long-term oriented investors, the robustness of the management regarding possible stockholder interference, and the managerial remuneration scheme. A bargaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between corporate governance and firm's optimal investment strategy and we study how different covernance structures shape technical progress and the degree of competition over the industrial life cycle. Numerical simulations of a calibrated set-up of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation.

Keywords: governance structure; industry dynamics; competition, technical change

JEL Classification: G34, L22, M12

Suggested Citation

Guerini, Mattia and Harting, Philipp and Napoletano, Mauro, Governance Structure, Technical Change and Industry Competition (November 23, 2020). Bielefeld Working Papers in Economics and Management Forthcoming, Available at SSRN: https://ssrn.com/abstract=3738026 or http://dx.doi.org/10.2139/ssrn.3738026

Mattia Guerini (Contact Author)

Scuola Superiore Sant'Anna di Pisa ( email )

Piazza Martiri della Liberta, n. 33
Pisa, 56127
Italy

OFCE - SciencesPo ( email )

69 Quai d'Orsay
Paris 75004
France

Philipp Harting

Bielefeld University - Faculty of Business Administration and Economics ( email )

Universitätsstraße 25
Bielefeld, 33615
Germany

Mauro Napoletano

Université de Nice Sophia Antipolis - Groupe de Recherche en Droit, Economie et Gestion (GREDEG) ( email )

250, rue Albert Einstein
Valbonne, 06560
France

Observatoire Français des Conjonctures Economiques (OFCE) ( email )

60, rue Dostoïevski
Sophia-Antipolis Cedex, 06902
France

HOME PAGE: http://www.ofce.sciences-po.fr

SKEMA Business School ( email )

60 rue Dostoïevski
Sophia Antipolis, 06902
France

Scuola Superiore Sant'Anna di Pisa - Laboratory of Economics and Management (LEM) ( email )

Piazza Martiri della Liberta, 33
Pisa, I-56127
Italy

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