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Knowledge as Property Rights Under the Ratchet Effect of Innovation
[The Management of Innovation]

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  • Teck Yong Tan

Abstract

This paper studies how reduced oversight creates an incentive for process innovation. With incomplete contracts, tight monitoring of workers creates a ratchet effect of innovation. Under reduced oversight, a worker accrues private knowledge about his innovation, which serves as a substitute for its inalienable property rights. The resulting asymmetric information generates an information rent for the worker, which feeds back as an innovation incentive ex ante. A weak early production incentive is required to complement it. Innovations are generally underutilized ex post, and mildly successful innovations are not distinguished from failed innovation attempts.

Suggested Citation

  • Teck Yong Tan, 2020. "Knowledge as Property Rights Under the Ratchet Effect of Innovation [The Management of Innovation]," Journal of the European Economic Association, European Economic Association, vol. 18(5), pages 2677-2714.
    • Handle: RePEc:oup:jeurec:v:18:y:2020:i:5:p:2677-2714.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvz056
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    Cited by:

    1. Xiaoke Zhao & Xuhui Ding & Liang Li, 2021. "Research on Environmental Regulation, Technological Innovation and Green Transformation of Manufacturing Industry in the Yangtze River Economic Belt," Sustainability, MDPI, vol. 13(18), pages 1-15, September.
    2. Tan, Teck Yong, 2021. "Assignment under task dependent private information," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 632-645.
    3. Tan, Teck Yong, 2023. "Optimal transparency of monitoring capability," Journal of Economic Theory, Elsevier, vol. 209(C).
    4. Kohei Daido & Tomoya Tajika, 2021. "Hidden Cost of Sanctions in a Dynamic Principal-Agent Model: Reactance to Controls and Restoration of Freedom," Discussion Paper Series 233, School of Economics, Kwansei Gakuin University.

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