Seminar  |  03/21/2018 | 12:00 PM  –  01:30 PM

Brown Bag Seminar: Organize to Innovate: Intellectual Property Regimes, Technology Adoption and Firm Structure

Chirantan Chatterjee (Indian School of Business)

Max Planck Institute for Innovation and Competition, Munich, Room 313

How do firms choose their organization design to innovate better? We use The Patents (Amendment) Act, 2002 that initiated a stronger patents regime in India as a quasi-natural experiment to identify the causal effect of higher incentives for innovation on firm structure. We find that: stronger intellectual property (IP) proection leads to an increase in managers' share of compensation. Moreover, this increase is about 1.6-1.7% more for firms that were already above the median (in their respective industries) in terms of technology adoption. This increase in managerial compensation is due to a sharp increase in incentive pay. While there is an increase in both managerial layers and the number of divisions within a firm, it is the latter which explains th edifference in managerial compensation between high-tech and low-tech firms. In other words, stronger IP leads to an increase in both within-firm and between-firm wage inequality, with more robust evidence for between-firm inequality.

Contact Person: Dr. Fabian Gaessler