Nanotechnology, General purpose technology, Patent analysis, 0330, 0300, 0340,

No abstract

We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new Örms and by the in-house investment of incumbent Örms. Firmsí managers engage in tunneling and empire building activities. Active shareholders monitor managers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these conáicts among Örmsí stakeholders inhibit the entry of new Örms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. Financial Markets, Industry Dynamics, and Growth AbstractWe study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new Örms and by the in-house investment of incumbent Örms. Firmsí managers engage in tunneling and empire building activities. Active shareholders monitor managers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these conáicts among Örmsí stakeholders inhibit the entry of new Örms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. By means of quantitative analysis, we characterize conditions under which corporate governance reforms boost or reduce welfare.