Research On Effect Of R&D Input On Managerial Equity Incentives

With the rapid development of knowledge economy，competition between countriesis the competition of technology，countries that master advanced technology can earnhuge economic benefits. Technology development depends on innovation. Researchand development is the inevitable process of innovation, so the R&D input is the necessarycondition for innovation. This requires that we must invest a lot of money for research anddevelopment. Although China has been vigorously encourage enterprises to innovate, butthe R&D input has the characteristics of large-scale investment, long investment cycleand high investment risk. So compared with the developed countries, ourcountries’R&D input still have a big gap.In the Modern Corporation system, ownership and control of the enterprise isseparated, so corporate had a principal-agent problem. The owner and the manager ofenterprise pursue different objectives, and different preferences of risk, so it will be aconflict of interest in the R&D input. The owners of the enterprise want to obtain greatereconomic benefits, so they hope manager invest to high risk R&D activities, because highrisk associated with high yield. Once the R&D investment is succeed, the enterprisecan obtain huge economic benefits because of the innovative products. In contrast toowners, enterprise managers are risk averse because managers personal reputation iscorrelated with the company’s business performance. If the R&D investment is failed,it will do a lot of harm to his credibility, and their jobs are at risk, so the managers willmake insufficient investment in R&D activities. A better way to solve this problem is theimplementation of equity incentive, give managers a certain stock of the company, so the interests of the owners and managers become more consistent. After the 《Equity IncentiveMeasures for the Administration of Listed Companies》 issued in2006, we chooseimplementation of equity incentive listed companies as samples. First we research equityincentive whether can affect the R&D investment by comparing before and afterimplementation of equity incentive. Then we research whether there is correlation betweenequity incentives and R&D input. If there is correlation between equity incentives andR&D input, so he relationship between the two is positive or negative. Then, join the crossterm, and research the company growth play a role in regulation.