The Effect of Adversity on Process Innovations and Managerial Incentives

48 Pages Posted: 7 Jul 2009

See all articles by Benoit Dostie

Benoit Dostie

HEC Montreal - Institute of Applied Economics; IZA Institute of Labor Economics

Rajshri Jayaraman

ESMT European School of Management and Technology

Multiple version iconThere are 3 versions of this paper

Date Written: June 2009

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.

JEL Classification: L20, O31, M52, J33

Suggested Citation

Dostie, Benoit and Jayaraman, Rajshri, The Effect of Adversity on Process Innovations and Managerial Incentives (June 2009). CESifo Working Paper Series No. 2684, Available at SSRN: https://ssrn.com/abstract=1428740

Benoit Dostie

HEC Montreal - Institute of Applied Economics ( email )

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Montréal, Quebec H3T 2A7
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HOME PAGE: http://www.hec.ca/profs/benoit.dostie.html

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Rajshri Jayaraman (Contact Author)

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, Berlin 10178
Germany

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