Strategic decision making for boosting innovation and TMT compensation in high-tech industry: evidence from China
by Muhammad Usman; Shufang Xiao; Dan Luo; Ningyue Liu
International Journal of Technology, Policy and Management (IJTPM), Vol. 18, No. 3, 2018

Abstract: This study investigates whether total, accounting-based and stock-based compensation packages for top management teams (TMTs) impact firms' total, internal R&D and external buying behaviour of getting new technology. Total innovation behaviour, internal R&D behaviour and external buying behaviour are examined across a sample of 86 A-share listed companies from the Chinese high-tech sector from the period 2009 to 2015. After controlling endogeneity issues, firm size, cash flow and various other firm characteristics, the results of three stage-least-square regressions (3SLS) analysis show that TMT total compensation is positively related to total innovation policy. Furthermore, the results of accounting based and stock based compensations suggest that when TMT compensation is heavily based on accounting performance, companies prefer to buy new technology through external sources and avoid internal R&D, whilst TMT compensation skewed more towards risk-based stock compensation encourages internal R&D and discourages external new technology acquisition.

Online publication date: Tue, 07-Aug-2018

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