We examine how performance changes at airlines in response to a change in executive incentives. Airlines with executive bonuses contingent on on-time arrival do improve on-time performance. We find evidence of strategic gaming of the incentive as some carriers increase scheduled flight times, making it easier for flights to arrive on time. This effect is more pronounced for competitive routes. Carriers also do not decrease the frequency of flights or the number of passengers to make it easier to be on time, but they do slightly decrease fares. Competitors on the same routes also improve their on-time performance, even when their executive bonuses are not contingent on on-time performance, consistent with competition in strategic complements. (JEL G30, G34, G32) Received February 5, 2018; editorial decision April 3, 2019 by Editor Andrew Ellul.

We demonstrate a novel link between skilled immigration restrictions, corporate innovation, and industry consolidation. Binding restrictions on H1B visas are a shock to firms’ R&D labor supply, leading firms to shift R&D expenditures and employees overseas. Organizationally and financially constrained firms are less able to adjust to the restrictions. They reduce basic research and patenting, are less able to acquire other firms for intellectual property, and are more likely to exit. Industry concentration and firm-level markups increase when firms are better able to adjust. This increase in market power is an unintended consequence of skilled immigration restrictions.