Abstract
While prior research primarily focused on the impacts of executives' stock options, we explore how granting stock options to R&D professionals may be an attention attractor that affects the firm innovation. Going beyond the agency view that stock options motivate innovation by aligning long-term benefits between employees and their companies, we propose that the frequency of granting stock options to R&D employees promote innovation by attracting their attention to innovation. The proportion of rewarded R&D employees weakens this relationship. In contrast, the proportion of industry peers that offer employee stock options to R&D professionals reinforces the relationship. We empirically tested our theory. We also compared our attentional perspective with the interest-based agency perspective on stock options and found consistent support.
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