Competitive pressure on the rate and scope of innovation

Younge, Kenneth; Tong, Tony W.

doi:10.1016/j.jebo.2018.03.026

Cited by 18 publications

(26 citation statements)

References 53 publications

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“…On the one hand, some studies provide evidence that job security induced by antitakeover provisions enhances innovative activity (e.g., Chemmanur & Tian, 2018). On the other hand, consistent with the “quiet life” hypothesis and the moral hazard view (Bertrand & Mullainathan, 2003); studies have also found that antitakeover protection reduces the intensity and scope of innovative activities (e.g., Atanassov, 2013; Younge & Tong, 2018).…”

Section: Introductionmentioning

confidence: 64%

“…At the same time, the use of a difference‐in‐difference identification strategy relies on the assumption that firm treatment (receiving antitakeover protection) is exogenous to the firm and its entrepreneurial intentions. Historical accounts at the time (e.g., Romano, 1987) highlight that the promotion of antitakeover provisions were generally the actions of a single entity, as opposed to statewide coalitions, so the implementation of takeover protection was exogenous to nearly all organizations eventually receiving takeover protection (Younge & Tong, 2018). Further, and particularly relevant to our study on entrepreneurship, Atanassov (2013) reports that of the firms that lobbied for takeover protections, innovation concerns were never a factor directly argued in their efforts.…”

Section: Resultsmentioning

confidence: 99%

“…As mentioned earlier, a concern of antitakeover protection is that it may result in agency behavior and managers' engaging in the “quiet life” rather than taking risks to enhance firm performance (Bertrand & Mullainathan, 2003). To further disentangle this alternative explanation, we build on prior research examining the effects of product market competition (Atanassov, 2013; Giroud & Mueller, 2010; Younge & Tong, 2018). Extending this research to our context, for proactive managers with career concerns, product market competition is likely to strengthen the positive effects of antitakeover protection on CVC adoption (Aghion et al, 2013).…”

Section: Resultsmentioning

confidence: 99%

“…In addition to the main effect and interaction terms described above, we also utilize a number of control variables associated with innovation and CVC. Firm size has been shown to influence the degree and direction of innovation expenditures, as well as adoption of CVC programs (Basu et al, 2011; Younge & Tong, 2018). Moreover, large firms that are diversified may also be prone to internal resource allocation inefficiencies which may prompt greater use of CVC programs as vehicles to source innovation externally (Cabral, Deng, & Kumar, Forthcoming).…”

Section: Methodsmentioning

confidence: 99%

“…First, as noted at the outset, empirical evidence of directional relationships is unsettled and mixed. Some studies find that innovation output falls when there is job security provided through antitakeover provisions, because managers prefer the quiet life and engage in shirking (e.g., Atanassov, 2013; Bertrand & Mullainathan, 2003; Younge & Tong, 2018). In contrast, other studies have theorized (Manso, 2011) and empirically demonstrated that innovation improves when there is job security afforded by antitakeover provisions (e.g., Chemmanur & Tian, 2018).…”

Section: Innovation Market Myopia and Job Securitymentioning

confidence: 99%

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The impact of managerial job security on corporate entrepreneurship: Evidence from corporate venture capital programs

Cabral

Kumar

2020

Strategic Entrepreneurship

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Research Summary We examine the role of managerial job security in the adoption of innovative practices and structures. Utilizing state level antitakeover protections as an exogenous shock, we find that when managers are afforded greater job security through these protections they exhibit a higher probability of initiating a Corporate Venture Capital (CVC) program. Furthermore, the positive effect of job security on CVC adoption is stronger when firms are research intensive, and when there are slack financial resources. Our results suggest that providing managers leeway to experiment while ensuring job security is important for corporate entrepreneurship and the willingness to experiment with innovative strategies. Managerial Summary Entrepreneurial activity often involves identifying opportunities that the rest of the marketplace overlooks. While this risk taking is celebrated as part of entrepreneurial folklore, in pragmatic terms, for managers of public organizations, it requires going against the prevailing wisdom of important stakeholders. Since stakeholders can hold considerable influence over top managers' employment, managers may avoid innovation if they feel experimentation and/or failure could cost them their jobs. This study demonstrates that when top managers have more job security, they are more likely to experiment with new organizational forms and structures by establishing Corporate Venture Capital units. The study demonstrates that job security not only impacts the amount of risk taken within existing operations, but also the willingness to experiment with novel ideas and activities.

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