Organizational structure, strategic delegation and innovation in oligopolistic industries

Evangelos Mitrokostas, E. Petrakis

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    Abstract

    We endogenize firms’ organizational structures in a homogenous goods duopoly where firms invest in cost-reducing R&D and compete in quantities, and examine their impact on R&D efforts and market performance. Each firm’s owner can either delegate to a manager both market competition and R&D investment decisions (full delegation (FD) strategy) or delegate the market competition decision alone (partial delegation (PD) strategy). We show that when the initial marginal cost is relatively high, universal FD emerges in equilibrium. Otherwise, an asymmetric equilibrium with one owner choosing an FD strategy and the other a PD strategy arises. Finally, universal PD can arise in equilibrium only if the competition is in prices.
    Original languageEnglish
    Pages (from-to)1-24
    JournalEconomics of Innovation and New Technology
    Volume23
    Issue number1
    Early online date21 Jan 2013
    DOIs
    Publication statusPublished - 2014

    Keywords

    • organizational structure
    • strategic delegation
    • Innovation
    • Oligopolistic Industries

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