Organizational Governance, Leadership, and the Influence of Competition

32 Pages Posted: 31 Mar 2010

See all articles by Michael Kopel

Michael Kopel

University of Graz

Clemens Löffler

University of Applied Sciences for Management and Communication (FHWien der WKW)

Date Written: March 25, 2010

Abstract

In this paper we study the emergence of firm asymmetry as an equilibrium outcome. We consider differentiated Cournot and Bertrand duopolies where firms endogenously select their organizational governance and their timing strategy for the market stage. It is shown that for both market structures asymmetric equilibria may occur, although they are more likely in price-setting environments. For Cournot competition, in an asymmetric equilibrium one firm selects market leadership and is owner-managed. The rival firm hires a manager, motivates this manager by writing an appropriate incentive contract, and moves late at the market stage. In Bertrand competition, both firms always select different timing strategies at the market stage. Depending on the costs of hiring a manager and the degree of substitutability between products, they mayalso select different organizational structures. Surprisingly, for Bertrand competition we observe that firms’ profits are non-monotonic in the substitutability between firms’ products, so that firms might be better off if the intensity of competition between firms increases. Finally, we also investigate if a first-mover or a second-mover advantage occurs in these equilibria.

Keywords: Firm heterogeneity, Organizational governance, First- or secondmover, Intensity of competition

JEL Classification: L1, L2

Suggested Citation

Kopel, Michael and Löffler, Clemens, Organizational Governance, Leadership, and the Influence of Competition (March 25, 2010). Available at SSRN: https://ssrn.com/abstract=1578127 or http://dx.doi.org/10.2139/ssrn.1578127

Michael Kopel (Contact Author)

University of Graz ( email )

Universitaetsstrasse 15 / FE
A-8010 Graz, 8010
Austria

Clemens Löffler

University of Applied Sciences for Management and Communication (FHWien der WKW) ( email )

Währinger Gürtel 97
Vienna, 1180
Austria

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