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Innovation and managerial incentives: a tale of two systems

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  • Secs-P/08 Economia E Gestione Delle Imprese

Abstract

This paper describes R&D competition between a managerial firm and an entrepreneurial one, in a Cournot market. It is shown that a manager interested in output expansion exerts higher R&D efforts, yielding productive efficiency as compared to the performance of a strictly profit-seeking firm. This may ultimately yield monopoly power for the managerial firm, if technological spillovers in the industry are low enough.

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