Performance Aspiration and Rent-Seeking Sergey Lebedev
OVERVIEW
What triggers rent-seeking by firms? Rent-seeking involves unproductive uses of resources to capture and redistribute value without creating new value, thus resulting in a significant net loss for society. Given the social costs of rent-seeking, it is crucial to look at factors that prompt firms to engage in such actions. We suggest that rent- seeking may be a response to firms exceeding or, conversely, falling short of their performance benchmarks. Applying behavioral theory of the firm and utilizing a novel measure of rent-seeking as patent “evergreening” in the pharmaceutical industry, we hypothesize and find that both performance relative to a firm’s own prior performance level and performance relative to a firm’s peers have a significant effect on rent-seeking.
46 | Summer Research Fellowship
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