Innovative knowledge assets and economic performance: The asymmetric roles of incentives and monitoring

We posit that a firm's resource configuration constitutes a critical context for various corporate governance mechanisms. Although innovative knowledge assets are generally a key determinant of a firm's economic performance, they also lead to greater information asymmetry among managers an...

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Bibliographic Details
Main Authors: HE, Jinyu, WANG, Heli
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2009
Subjects:
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/3446
https://ink.library.smu.edu.sg/context/lkcsb_research/article/4445/viewcontent/40390324.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:We posit that a firm's resource configuration constitutes a critical context for various corporate governance mechanisms. Although innovative knowledge assets are generally a key determinant of a firm's economic performance, they also lead to greater information asymmetry among managers and owners and to the need to grant managers more discretion in making resource deployment decisions. This weakens the role of monitoring but increases the effectiveness of incentive mechanisms. Therefore, we hypothesize asymmetric moderating effects of monitoring- and incentive-based governance mechanisms on the relationship between innovative knowledge assets and economic performance. Our empirical analyses provide support for the key arguments.