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Does the Pay Gap in the Top Management Team Incent Enterprise Innovation?—Based on Property Rights and Financing Constraints

DOI: 10.4236/ajibm.2018.85088, PP. 1290-1307

Keywords: The Pay Gap in the Top Management Team, Enterprise Innovation, Property Rights, Financing Constraints

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Abstract:

Using the patent applications data of listed firms in China from 2005 to 2014, this paper examines how the pay gap in the top management team influences enterprise innovation. The result shows that the number of patent applications especially the number of patents for invention increases significantly when the pay gap enlarges. It means the enlargement of the pay gap in the top management team could incent executives to make innovation decisions, to promote outputs of high-quality patents for invention. Finally the quality of enterprise innovation has been improved. Especially, the incentive effect of the pay gap in the top management team is more significant in private enterprises and enterprises with strong financing constraints. Therefore, enterprises in these two groups have better innovation behaviors.

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