Abstract
How to use the pay contract to encourage executives to implement innovation activities has become an important issue to be solved by the theoretical and practical circles. Based on the data of Shanghai and Shenzhen A-share listed companies from 2006 to 2015, this paper examines the impact of external compensation gap on corporate innovation, and further discusses the contextual effects of executive talent and property rights. The study finds that the external compensation gap of executives has a positive effect on enterprise innovation. Moreover, the higher talent executives possess, the more obvious the external compensation gap will promote the innovation of enterprises. In addition, compared with state-owned enterprises, the external compensation gap of non-state-owned enterprise executives has a more significant effect on corporate innovation. This paper not only expands the economic consequences of the external compensation gap, but also provides inspiration for companies to adjust the compensation structure and encourage executives to promote enterprise innovation.
Highlights
Based on the data of Shanghai and Shenzhen A-share listed companies from 2006 to 2015, this paper examines the impact of external compensation gap on corporate innovation, and further discusses the contextual effects of executive talent and property rights
This paper takes the data of Shanghai-Shenzhen A-share listed company from 2006 to 2015 as a research sample, and systematically studies the relationship between external compensation gap and enterprise innovation with its internal mechanism
The study found that the external compensation gap is significantly positively related to corporate innovation and that stimulating external compensation gap can promote enterprise innovation
Summary
Since the reform and opening up, the Chinese economy has maintained a relatively rapid growth, the extensive economic development model has. With the gradual disappearance of China’s demographic dividend advantage, Chinese companies are facing the dual pressures of high-end technology from emerging economies and cheap labor in other emerging economies [1] Under this predicament, technological innovation has become an effective path and an inevitable choice for enterprises to transform their economic growth models, gain long-term competitive advantages, and break through the bottleneck of development. Corporate innovation activities are a strategic activity with high risk factors, long durations, and difficult to predict future returns This will have a greater impact on the reputation and revenue of the top management team, which makes the management unwilling to lead. How to design an effective and fair compensation contract, and stimulate the executive team to implement innovative activities is an important issue that enterprises need to solve. The research structure of this paper is as follows: the second part is the literature review and research hypothesis; the third part is the research designing; the fourth part is the empirical results and analysis; the fifth part is the research conclusion, research contribution, policy enlightenments and research inadequacies
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