Research On Executive Incentive,Risk-taking And Enterprise Innovation Performance

In the era of knowledge-based economy,China is gradually transforming into an innovative country,and innovation has therefore become an important factor for meeting the needs of survival and development of various industries in the complex and changing economic environment.In order to enhance the quality of innovation of listed companies and enable them achieve sustainable competitive edge in the increasingly competitive market environment,the Fifth Plenary Session of the 19 th Central Committee clearly proposed to adhere to the core position of innovation in the overall situation of China’s modernization;the Sixth Plenary Session of the 19 th Central Committee took "adhering to innovation" as the experience of struggle and required the whole Party to adhere in the long-term.Enterprises are the main body of innovation,and the improvement of their innovation quality has an important impact on the rise of national innovation capacity.However,there is an inherent contradiction between the conservatism and myopia that the executives may have and the risk and long-cycle periodicity of innovation,which leads to a lack of motivation for innovation,and it is therefore valuable to explore the positive roles of executives in innovation activities,resolve the aforementioned confrontation between innovation and executives,and give companies a competitive advantage.It is therefore proposed that executive incentives,as an important element of corporate governance,is an effective institutional design to mitigate the risk agency problem within the firm,which can break the innovation inertia of executives and motivate them to take risks,which is significant to achieve the compatibility of executive interests and innovation performance.Based on the above background and reference of relevant domestic and foreign literature,the relationship between executive incentives and corporate innovation performance is investigated based on Principal-agent Theory,Incentive Management Theory,Innovation Management Theory and Behavioral-agency Theory.In addition,the influence of synergy mechanisms and the mediating mechanism of executive risk-taking have also been investigated.Combining the normative Research and Empirical Research Methods the following conclusions were obtained: the incentives of executives can significantly affect the innovation performance of enterprises;there is a synergistic effect among executive incentives,i.e.there is an interaction between compensation,equity and promotion contracts,and the integration and synergy of the three can better promote the innovation performance of enterprises.The risk-taking ability of executives partially mediates the relationship between executive incentives and innovation performance,i.e.executive incentives reduce risk aversion and make executives more willing to take risks,thus increasing their preference for high-quality innovation.The above findings provide important insights into how firms can implement executive incentives to enhance innovation performance: on the one hand,in order to develop a diversified executive incentive synergy mechanism,executive incentive contracts must be adapted to the actual situation of the firms,so that different incentive approaches form their own complementary strengths and coordination balance,thus the purpose of discouraging managers’ short-sighted behaviour and motivating managers’ positive behaviour can be achieved;on the other hand,when executives research and develop innovation decisions,enterprises should strengthen their risk supervision and raise their awareness of risk control,so that executives can actively take risks but not excessive risk-taking,thus the role of incentives can be truly played and the long-term benefits of enterprises can be achieved.Possible contributions of the study are: on the one hand,from the perspective of executive incentives,the impact of three representative incentive methods(compensation,equity and promotion incentives)on corporate innovation performance is explored,with a focus on the study of whether the interactive coupling of multiple incentive factors generates additional benefits based on the incentive synergy perspective,and the research on the relevant factors affecting corporate innovation inputs and outputs are also researched.On the other hand,most of the current research on risk-taking are focused on the firm level.The study investigates the extent to which individual executives can take risks based on their external choices and their behavioral preferences,and analyses the mediating role played by them in the relationship between incentives and innovation performance from the perspective of mediating effects.