When Does Equity Sharing of Core Employees Incentive Innovation for Small and Medium Enterprises?

Abstract

This paper explores when equity sharing of core employees could better incentive innovation for small and medium high-technology manufacturing enterprises. With the data of 180 small and medium high-technological manufacturing enterprises from China’s Over-the- counter Exchange Market specially for Small Companies with low stock liquidity, which have published equity sharing incentive announcement between the years of 2014-2017, this paper find three interesting results. First, the staff breadth of equity sharing incentive is significantly positive with innovation performance, but the relationship between the share intensity of equity sharing incentive and innovation performance is not significant. Second, the relationship between the staff breadth and share intensity of sharing incentive for core R&D employees and innovation performance is non-linear and is inverted U-type, while the relationship between the staff breadth of sharing incentive for managers and innovation performance is negative. Third, when the largest shareholder has lower equity concentration, and the enterprise has stronger internal check-and-balance power of multiple blockholders, the relationship between the staff breadth of equity sharing incentive and innovation performance is stronger.