The Effect Of Executives Incentives On Technological Innovation In China Innovative Enterprises

In the end of2005，China began to implement the technology innovation guideengineering，innovative enterprise pilot project was launched in April2006.So far,China has selected four batches national innovative pilot enterprises and batches ofprovincial innovative pilot enterprises. In China’s "Twelfth Five-Year" Plan, as adevelopment goal,the state is going to be an innovative country. Building innovativeenterprises is the key projects of construction and the state will invest a lot of moneyto support the rapid development of innovative enterprises. As the main body that candrive innovation-executives is the main factor of production in innovativeenterprises. How to attract and retain the best executives and incentive technicalinnovation is critical to the development of innovative enterprises. Therefore，executives incentive mechanism directly related to the long-term development of theenterprise.In this paper,we use the combination of theoretical analysis and empiricalresearch，to analysis the affect of executives incentives to technological innovationmore comprehensive.Based on defined the concepts innovative enterprises and theircharacteristics, incentive mechanism and technological innovation, firstly, weintroduce the theoretical foundation of the executive incentive mechanisms affectenterprise technology innovation, and analysis the causes of executives excessiveincentives, so as to arrive the theoretical path of executives incentives affecttechnological innovation.Secondly, based on innovative enterprises in China, weanalyze the current situation and problems of innovative enterprise technologyinnovation. Thirdly,by the control of variables like industry characteristics, firmcharacteristics and executives characteristics,we test how the executive compensationand shareholdings affect enterprise technology innovation in innovative enterpriseslisted companies.The conclusions of this study are:①the higher average annual return ofexecutives and the total compensation of the top three directors in innovative listedcompanies, the more patent applications in companies;②there is a left lower righthigher inverted U-shaped relationship between the total compensation for seniormanagement in the top three and patent applications, indicate the presence of a moresignificant effect of marginal diminishing and excessive incentive;?executives shareholdings significantly positively relate to patent applications,the companies thatimplemented equity incentive had more patent outputs than the companies did not.Finally, based on the conclusions of this study,we propose some countermeasuresand suggestions for improve innovative corporate executives incentive mechanism topromote enterprise technological innovation, and also review and summarize theshortcomings of this study.