PUB - Publikationen an der Universität Bielefeld

We develop a model to study the impact of corporate governance on the investment de-cisions of firms and competition in an industry populated by publicly owned firms. A bar-gaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between governance and investment strategy and we study how different governance structures shape technical progress and competition over the industrial life cycle. Numerical simulations of a calibrated set-up of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation. (c) 2021 Elsevier B.V. All rights reserved.