Does Executive Reputation Promote Innovation Quality?——Research Based on Patent Citation Data

Abstract

Compared with explicit incentive contracts such as salary and equity, can reputation incentive, which are both long-term and binding, curb management's short-termism and enhance the innovation quality of enterprises? Based on the principle-agent theory, we empirically tested the impact of executive reputation on corporate innovation quality and the mechanism of its effects accordingly. Based on the panel data of Chinese listed companies from 2008 to 2020, there are three major findings emerging from the data analysis: (1) executive reputation has a significant positive effect on corporate innovation quality; (2) in terms of technological innovation path, executive reputation promotes corporate innovation quality by increasing the level of corporate independent research and development (R&D) investment rather than external technology purchasing; and (3) this driving effect is stronger for firms with more executives who have academic experience. The findings enrich the research on the governance utility of reputation incentives in the context of China and shed light on how to enhance the level of high-quality corporate innovation by optimizing executive incentive contractual arrangements.