Executive Incentives,Management Tenure And Corporate Innovation

Report to the Nineteenth National Congress of the Communist Party of China points out that innovation is the first driving force leading development and the strategic support of the modernization of the economic system.How to change China's economy from a simple "factor-driven" development model to an "innovation-driven" development model has become the top priority in the current period.Enterprises,as the main innovation,has received considerable attention of scholars.Principal-agency theory points out that managers often lack innovation motivation in the case of separation of ownership and control.To alleviate the above problems,incentive theory holds that managers' behavior goals can be aligned with shareholders through the implementation of incentive policies,which can effectively protect the business activities of enterprises and enhance managers' support for enterprise innovation.In addition,the Upper Echelons Theory points out the importance of executive's personal characteristics to enterprise decision-making,while the management defense theory points out that senior managers will maintain their positions and pursue the maximization of their own utility.Therefore,the impact of executive tenure on the relationship between executive incentives and enterprise innovation can not be ignored.Based on the above theory,using the data of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2007 to 2017,this paper empirically explores the role of executive incentives in enterprise innovation,and adds executive tenure as a moderating variable.On the basis of the existing research ideas and methods,this paper attempts to achieve more from the following aspects: Firstly,the paper takes the equity incentive of non-state-owned enterprises and the political promotion incentive of state-owned enterprises as the breakthrough point,differentiates the effects of executive incentive driving mechanisms according to different nature of enterprises,breaks the limitation of ignorance of the key factor,property right,in the relationship between executive incentive and enterprise innovation.Secondly,the paper uses executive tenure as a moderating variable.Based on the theory of "career worries",after analysing the stage point of executive tenure,the paper explains the moderating effect of executive tenure on the relationship between executive incentive mechanism and enterprise innovation better.Finally,after controlling the endogenous influence between executive incentive and enterprise innovation input,this paper focuses on innovation input-output efficiency.By analyzing the influence of executive incentive on innovation input-output efficiency,we can judge whether the executive's decision-making motivation is based on formalism,and further explore the mechanism of executive incentive on enterprise innovation.The main assumptions and conclusions of this paper are as follows:(1)In non-state-owned enterprises,executive equity incentives are positively correlated with innovation investment.Equity incentive can reduce Executives' principal-agent motivation,make their pursuit of personal value maximization consistent with the goal of enterprise value maximization,and executives would be more motivated to enhance the level of enterprise innovation to improve enterprise value.(2)In state-owned enterprises,executive political promotion incentives are negatively correlated with enterprise innovation investment.In order to reduce or avoid the crisis of demotion,the managers of state-owned enterprises usually have low innovation motivation,and the level of innovation investment of enterprises also decreases.(3)In non-state-owned enterprises,executive tenure can positively moderate the relationship between equity incentives and innovation investment.Generally speaking,in non-state-owned enterprises,due to the lag of innovation returns,executives will show obvious cautious characteristics in innovation investment at the beginning of their tenure,and have high motivation of management defense.With the extension of tenure,executives' control over the company is strengthened,and their investment in R&D investment is more assured,which promotes the positive impact of equity incentives on innovation investment.(4)In state-owned enterprises,executive tenure positively moderates the relationship between political promotion incentives and innovation investment.The reason is that in the pre-service period,due to the pressure of performance appraisal,state-owned enterprise executives will do their best to strive for promotion opportunities,and the level of innovation investment is also enhanced.At the end of their tenure,state-owned-enterprise executives are more willing to maintain the status quo in order to maintain or seek higher political promotion incentives.(5)Innovation input of enterprises has a positive impact on innovation output,and the interaction between executive incentive and innovation input also affects the level of innovation output of enterprises.In non-state-owned enterprises,executive equity incentives inhibit the input-output ratio of innovation,which may be due to the "formalism" innovation investment caused by the blind increase of R&D investment by executives in order to maintain their career or have a better reputation.In the state-owned enterprises,the incentive of executive political promotion promotes the input-output rate of innovation.This is because the "stability" mentality of executives seeking political promotion makes unnecessary investment in innovation lower.Finally,based on the conclusion of empirical analysis,this paper puts forward relevant policy recommendations for enterprises,and prospects the future research based on the shortcomings of this paper.In conclusion,the research on the relationship between executive incentive,executive tenure and enterprise innovation has broadened the research horizon of influencing factors of enterprise innovation,enriched the research results of related issues,and has great significance for improving the incentive system of enterprise executives,improving the level of enterprise innovation,and achieving the goal of building an "innovation-driven" economic development model.