THE EFFECT OF EXECUTIVE INCENTIVES ON TECHNOLOGICAL INNOVATION OF DECLINING ENTERPRISES – THE MODERATING EFFECT OF DECLINE DEGREE AND ORGANISATIONAL SLACK

Abstract

We examine the effects of different types of executive incentives on technological innovation of declining firms and the moderating effects of the degree of decline and organisational slack on executive incentives and enterprise technological innovation. We also assess the synergetic effects of different types of executive incentives on technological innovation of declining enterprises. We find the following: first, executive compensation incentive, equity incentive and control incentives are beneficial to promote technological innovation in declining enterprises. Second, the degree of decline negatively moderates the relationship between equity incentive and technological innovation. Third, organisational slack positively moderates the relationship between equity incentive and technological innovation, as well as the relationship between control incentives and technological innovation, especially for severely declining enterprises. Fourth, there are synergistic effects between executive control incentive and compensation incentive, control incentives and equity incentive on technological innovation. The contributions are as follows: first, taking declining enterprises as sample, we suggest that to increase the role of compensation incentive and equity incentive in promoting technological innovation in declining enterprises, the control incentives should be strengthened. Second, organisational slack should be fully exploited for severely declining enterprises so that executives should have the motivation and conditions to carry out technological innovation and further help declining enterprises to turnaround successfully.