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The impact of executive compensation incentive on corporate innovation capability: Evidence from agro-based companies in China

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  • Yue Shang
  • Jian Xu
  • Jing Li

Abstract

This paper aims to examine the impact of executive compensation incentive on corporate innovation capability by dividing executive compensation incentive into short-term monetary incentive and long-term equity incentive. We also investigate the interaction between the two types of executive compensation incentive. Data are collected from China’s agro-based companies during 2012–2019, and multiple regression analysis is utilized. The empirical results show that short-term monetary incentive has no impact on innovation capability, while long-term equity incentive stimulates innovation capability. Regarding company ownership, the impact of long-term equity incentive in state-owned enterprises is greater than that in private-owned enterprises. In addition, the complementary effect between short-term and long-term compensation incentive has a positive impact on innovation capability regardless of company ownership. The findings of this paper could help agribusiness managers to design the reasonable incentive system to incentivize corporate executives and enhance the capability of independent innovation.

Suggested Citation

  • Yue Shang & Jian Xu & Jing Li, 2023. "The impact of executive compensation incentive on corporate innovation capability: Evidence from agro-based companies in China," PLOS ONE, Public Library of Science, vol. 18(9), pages 1-14, September.
    • Handle: RePEc:plo:pone00:0291517
    DOI: 10.1371/journal.pone.0291517
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    References listed on IDEAS

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    1. Jian Xu & Jae-Woo Sim, 2018. "Characteristics of Corporate R&D Investment in Emerging Markets: Evidence from Manufacturing Industry in China and South Korea," Sustainability, MDPI, vol. 10(9), pages 1-18, August.
    2. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
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