We investigate the relationship between management incentives and collusion. This is particularly important as the manager acts on behalf of the owner and determines the firm strategy. Compensation schemes, intended to overcome the principle-agent problem between shareholders and managers, generally determine their managerial actions. While this is beneficial by aligning managers’ interests with those of the firm’s shareholders, the means to achieve this goal could be detrimental from a social welfare perspective. Our empirical analysis is based on a combination of firm, manager, and cartel data to identify managers' remuneration schemes and cartels within the United States. We show that a higher degree of managers' long-term incentives indeed facilitates and stabilizes collusion. Further analyzing the remuneration schemes of various management positions, we find that the impact is particularly pronounced for non-CEOs and CFOs. Additional results imply that firms run by managers with a higher share of equity compensation or more equity-based risk-taking incentives are more likely to behave anti-competitive.

We explore whether there is a relationship between CEO overconfidence and collusion. Overconfidence may make managers compete if they expect to be able to outperform their competitors, or it may push them to collude if they expect not to be caught/convicted or if their expected sanction is low. On the other hand, there may be a feedback effect in the sense that CEO overconfidence may increase during the duration of the cartel while the cartel remains undetected. Further, this growth in overconfidence may lead to the cartels being discovered. Overconfidence is defined, as in Malmendier and Tate (2005), as the tendency to hold too much firm risk, in a "habitual" (longholder, and net buyer) or short-term (holder 67) manner. We document that: (1) there is a positive and highly significant relationship between overconfidence and collusion, and (2) overconfidence granger causes cartel participation (net buyer) (and not the other way around). We then examine the mechanisms underlying this relationship.

How does technology transfer of government inventions affect follow-on innovation? Being aware of the importance of technology development and commercialization, the United States enacted a group of policies in the 1980s that aimed at promoting the commercializing of government-funded research by licensing. It, however, remains questionable whether patenting and licensing are appropriate tools to spur welfare-improving follow-on innovation. We exploit technology-related information from the NASA Technology Transfer Program that fosters the licensing of NASA technologies by third parties and combine it with United States patent data. We find that NASA technologies in the licensing portfolio show a similar follow-on innovation pattern as those that are not. Leveraging the information about the licensing status, we find that an exclusive licensing agreement facilitates subsequent technological developments. Consequently, our results imply that commercialization by licensing government inventions is an important policy tool to increase the benefits for society.