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The Effect of Adversity on Process Innovations and Managerial Incentives

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  • Benoit Dostie
  • Rajshri Jayaraman

Abstract

This paper asks whether adversity spurs the introduction of process innovations and increases the use of managerial incentives by firms. Using a large panel data set of workplaces in Canada, our identification strategy relies on exogenous variation in adversity arising from increased border security along the 49th parallel following 9/11. Our longitudinal difference-in-differences estimates indicate that firms responded to adversity by introducing new or improved processes, but did not change their use of managerial incentives. These results suggest that the threat of bankruptcy may provide impetus for improving efficiency.

Suggested Citation

  • Benoit Dostie & Rajshri Jayaraman, 2009. "The Effect of Adversity on Process Innovations and Managerial Incentives," CESifo Working Paper Series 2684, CESifo.
    • Handle: RePEc:ces:ceswps:_2684
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    References listed on IDEAS

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    Cited by:

    1. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo.

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    More about this item

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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