Commitment in R&D tournaments via strategic delegation to overoptimistic managers

Englmaier, Florian (2011): Commitment in R&D tournaments via strategic delegation to overoptimistic managers. In: Managerial and Decision Economics, Vol. 32, No. 1: pp. 63-69

Abstract

This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a manager's type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments. Copyright © 2010 John Wiley & Sons, Ltd.

• Item Type: Journal article
• Form of publication: Publisher's Version
• Faculties: Economics; Economics > Chairs > Seminar for Organizational Economics
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 01436570
• Language: English