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Sunk Costs, Managerial Incentives and Firm Productivity

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  • Alexandra Groß-Schuler
  • Jürgen Weigand

Abstract

In this paper, we use a production function approach to examine the impact of ownership concentration, product market competition and financial pressure on German firm productivity. Additionally, we are interested in the influence of ownership identity and changes in ownership structure. We also test whether the specificity of assets affects productivity performance. Based on a panel of 361 German manufacturing companies for the time period of 1991-1996 we find that supplier concentration has a positive influence on firm productivity. There is also some evidence for a discipline-of-debt effect. Interestingly, the presence of several strong shareholders affects productivity negatively. In high sunk costs industries an owner change is negatively correlated with firm productivity whereas in low sunk costs industries productivity increases after owners have changed.

Suggested Citation

  • Alexandra Groß-Schuler & Jürgen Weigand, 2001. "Sunk Costs, Managerial Incentives and Firm Productivity," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 70(2), pages 275-287.
    • Handle: RePEc:diw:diwvjh:70-20-15
    DOI: 10.3790/vjh.70.2.275
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