The Impact Of Executive Compensation Gap On Enterprise R&D Investment From The Perspective Of Managerial Power

Not only the motive force for the development and survival of an enterprise innovation is,but also an important way for an enterprise to adapt to the social development,and an indispensable part of the enterprise development.The prosperity of innovation activities is the key to enhance the competitiveness of enterprises and the inexhaustible driving force for sustainable development of enterprises.Considering the input-output ratio,R&D investment as the starting point of innovation activities cannot be ignored.Despite the increasing social attention paid to R&D in recent years,enterprises have increased their investment in this area.However,compared to developed countries,the proportion of R&D investment in the company's revenue or total assets is still inadequate.It is urgent to increase R&D investment.R&D decision-making is closely related to the long-term development strategy of enterprises and the preferences of management decision-making.The agency cost between managers and shareholders,to a certain extent,causes managers to focus on private interests while ignoring the long-term value of the enterprise,thus triggering short-sighted behavior.In order to avoid such situation as much as possible,it is imperative to use the incentive mechanism as a breakthrough point to explore the impact of the pay gap on R&D decision-making..Most of the existing studies are based on the theory of optimal compensation contract.It is believed that a reasonable compensation scheme can effectively reduce agency costs,improve enterprise performance,and pay less attention to R&D investment.In view of the small amount of literature related to R&D investment,it focuses on the internal pay gap of management,while ignoring vertical management comparison.Nevertheless,the impact of many studies on the pay gap within management is usually based on tournament theory,focusing on a single linear relationship,neglecting that too high the pay gap within the management team will lead to team conflict,thus causing adverse effects.Meanwhile,people fail to consider the impact of managerial power theory on the premise of optimal compensation contract theory,which means that the independence of the board is difficult to maintain,whether the incentive effect of the pay gap is completely effective remains to be tested.Based on the previous research and development results on the pay gap,this paper studies the impact of internal and external pay gap on R&D investment through the analysis of principal-agent theory,optimal compensation contract theory and managerial power theory,and then analyzes the role of internal and external pay gap on R&D investment under the premise of management intervention in salary formulation.Firstly,we define the basic concepts of salary gap,R&D investment,managerial power.Secondly,the theoretical basis of the article is also showed by this paper.What's more,we also summarize the relevant research results at home and abroad.On this basis,the hypothesis of this study is put forward with the measurement methods of relevant variables.This paper collects the relevant data of Listed Companies in Shanghai and Shenzhen Stock Exchanges from 2013 to 2017,and uses multiple regression analysis.On the one hand,based on the optimal contract theory,this paper discusses the impact of external pay gap on R&D investment.On the other hand,it uses threshold effect model to discuss the role of internal pay gap in management team.All in all,combined with the theory of management power,this paper examines the impact of pay gap on R&D investment from the perspective of managerial power.Through empirical research,the main conclusions of this paper are as follows:(1)the external pay gap of manager is positively correlated with R&D investment;(2)the appropriate internal pay gap of management team has a positive impact on R&D investment.When the gap is too large,the positive impact is weakened or even no longer significant.(3)Managerial power will restrain the positive impact of management pay gap on R&D investment.In addition,our further studies show that the impact we mentioned above is more obvious in the high-tech industry.The main contributions of this paper are as follows:(1)The main decision-makers of R&D strategy is manager In order to fundamentally promote enterprise innovation,we should focus on changing the preferences of decision-makers and unifying individual and enterprise goals.The incentive for managers comes from material or spiritual aspects.Obviously,the former is better in measuring and controlling.This paper concludes that the appropriate salary gap within the team can effectively expand R&D investment,provide a reference for enterprises to formulate reasonable salary schemes,help to improve the level of R&D investment of Listed Companies in China,and promote enterprise innovation.(2)From the perspective of managerial power,the research shows that the abuse of managerial power and the intervention of managers in the process of making compensation by the board of directors will inhibit the promotion effect of the pay gap on R&D decision-making.The power rent-seeking behavior of managers makes salary incentives no longer fully effective.Only by strictly controlling the power of management and guaranteeing the independence of the board of directors can we maximize the incentive role of the compensation scheme.This conclusion provides a certain reference for the formulation of the company rules.