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The Effect of Adversity on Process Innovations and Managerial IncentivesBenoit DostieHEC Montreal - Institute of Applied Economics; Institute for the Study of Labor (IZA) Rajshri JayaramanESMT European School of Management and Technology IZA Discussion Paper No. 4261 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.
Number of Pages in PDF File: 45 Keywords: process innovation, managerial incentives, efficiency, natural experiment JEL Classification: L20, O31, M52, J33 working papers seriesDate posted: July 21, 2009Suggested CitationContact Information
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