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Governance structure, technical change, and industry competition

Author

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  • Guerini, Mattia
  • Harting, Philipp
  • Napoletano, Mauro

Abstract

We develop a model to study the impact of corporate governance on the investment decisions of firms and competition in an industry populated by publicly owned firms. 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 governance and investment strategy and we study how different governance structures shape technical progress and 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.

Suggested Citation

  • Guerini, Mattia & Harting, Philipp & Napoletano, Mauro, 2022. "Governance structure, technical change, and industry competition," Journal of Economic Dynamics and Control, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:dyncon:v:135:y:2022:i:c:s0165188921002293
    DOI: 10.1016/j.jedc.2021.104294
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    More about this item

    Keywords

    Governance structure; Industry dynamics; Competition; Technical change;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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