Innovations: Asymmetries between of Shareholders’ and Managers’ Interests

Abstract

The article is devoted to the analysis of motivation of dominating shareholders and hired mana gers as regards radical and incremental technological innovations. It is shown that in some cases there is even a contradiction in their attitudes to innovations. The author proves that hired managers can be expected to avoid radical innovations, whereas shareholders can be interested in them, as radical innovations — at least for some time — induce expectations of big profits which result in considerable increases of prices for the innovator’s shares. The discussed asymmetry the author treats as one more feature to the agency problem in relations between shareholders and hired management.

Keywords:

radical and incremental technological innovations, motivation of shareholders and managers, asymmetries and contradictions