Corporate governance practices and companies' R&D orientation: evidence from European countries.

Publishing date: 24 January 2011
Authors: Bruno van Pottelsberghe

This working paper empirically investigates if corporate governance practices affect the resources firms devote to R&D. The authors Florence Honoré, Federico Munari and Bruno van Pottelsberghe found that an executive remuneration system that is linked to the firm's financial performance has a particularly strong negative impact on R&D. This confirms the hypothesis that incentive mechanisms lead managers to focus on more predictable and easily measurable short-term activities,ultimately hampering the commitment to innovative projects.

About the authors

Bruno van Pottelsberghe

Bruno van Pottelsberghe joined Bruegel as a Senior Resident Fellow in November 2007. His research for Bruegel focuses on the effectiveness of several policy tools (R&D subsidies, R&D tax credits, intellectual property, public research and regulatory policies) aimed at stimulating innovation in Europe.

He was the Chief Economist of the European Patent Office (EPO) from November 2005 to the end of 2007. Since 1999 he has been a professor at the Brussels University (U.L.B.). As holder of the Solvay S.A. Chair of Innovation, he teaches courses related to the economics and management of innovation and intellectual property.

He is also an adviser of the President and the Rector of the U.L.B. for technology transfer issues.