Equity Incentive And Corporation Innovation

The 19 th national congress of the Communist Party of China was held in Beijing in 2017,through which innovation became a frequently used word,and President Xi Jinping stressed that innovation is the primary driving force of development.Building an innovative country has been identified as a national goal,which means innovation is of great importance.As a basic unit of national economy,on the one hand,enterprises take the responsibility for promoting national overall innovative ability continuously,on the other hand,innovation is the fundamental power for enterprises.However,since corporate innovation shows the characteristics of long period and high uncertainty and investment risk,top executives and employees tend to emphasis more on personal interests and overlook enterprises' long-term growth,which is adverse to shareholders' interests,then the agency issues appear.After the reform of the shareholder structure,stock-based compensation turns out to be a modern tool,and companies use it for the purpose of keeping and motivating talents.Whether this tool can solve the agency problems and promote corporate innovation is remained to be seen.Take Han's Laser as an example.This article analyzes the impact of incentive scheme design on innovation motivation,and the influence of stock-based compensation on corporate innovation through vertical and horizontal comparison.Then we find stock-based compensation poses impact on corporate innovation through executives,key technicians and key sales.Innovation input,output and output conversion are promoted,namely,stock-based compensation does promote innovation,but we suggest Han's Laser improve governance structure,incentive scheme and relieve their dependence on major clients.The article includes five parts:The first part is introduction,in which the research background,purpose,methods,framework as well as contribution is introduced.The second part describes related concepts,literature review and theoretical basis.Two core concepts namely stock-based compensation and corporate innovation,and four principles namely principal-agent theory,convergence-ofinterest hypothesis motivation theory and Joseph Alois Schumpeter's innovation theory are described as the basis of explaining the mechanism of how stock-based compensation influences corporate innovation.In this part dominant academic view of corporate innovation and the relationship between stock-based compensation and corporate innovation is introduced,so that we can realize recent research progress.The third part is analysis of the influence of stock-based compensation on corporate innovation.To start with agency problems of corporate innovation,the reasons and impact path are analyzed as the basis of the fourth part.The fourth part is a central part namely case study.First,we introduce the selection criteria,company background,incentive scheme.Then we analyze the influence of stock-based compensation on innovation input,output and output conversion through vertical and horizontal comparison.From vertical views,we compare its performance before,during and after the stock-based compensation.While,from horizontal views,we compare Han's Laser with its direct competitor Huagong Technology and make deep analysis of their performance during stockbased compensation.The last part is conclusion and proposal,in which research conclusion is summarized and relevant proposals are given.We propose to strengthen the promotion of stock-based compensation on corporate innovation more effectively.Lastly,the limitation and outlook is described.The contributions lie in a certain case study and new analyzing method.This paper uses case study method instead of empirical analysis,and when analyzing the relationship between stock-based compensation and corporate innovation,we add horizontal comparison and lengthen the studying period of vertical comparison.Then we properly design the measurement system of corporate innovation,in which we add two metrics namely innovation output quality and number of national standards that are directed or participated in by corporation.