Internal & External Pay Dispersion of Executives and Enterprise Innovation

Abstract

Innovation is the source of sustainable development of enterprises. Therefore, its influencing factors have long received extensive attention from academia. This paper takes China's A-share listed companies from 2008 to 2017 as a research sample to examine the relationship between the internal & external pay dispersion of executives and corporate innovation. The results show that: the internal pay dispersion of executives promotes the innovation of the enterprise; the external pay dispersion of the executives inhibits the innovation of the enterprise; the external pay dispersion of the executives enhances the positive effect of the internal executive pay dispersion on the innovation of the enterprise. Further, it is found that compared with non-state-owned enterprises, the internal pay dispersion of state-owned enterprises has a smaller role in promoting the innovation of the enterprise, and the external pay dispersion of executives has a smaller inhibitory effect on the innovation of the enterprise. Executive power enhances the positive effect of the internal pay dispersion on the innovation of the enterprise, and also strengthens the inhibitory effect of the external pay dispersion on the innovation of the enterprise. The above research findings reveal the intrinsic relationship between executive compensation incentive policies and corporate innovation, and provide a theoretical reference for companies to establish efficient incentive mechanisms and promote corporate innovation and development.