Research on the Impact of Executive Compensation on Innovation Capability in the Automobile Industry

Abstract

Abstract:

The automobile industry in China is faced with a new competing environment,thus requiring carmakers to enhance innovation by optimizing their manufacturing process and upgrading their industry system.The innovation capability of a carmaker empirically depends on the strategic decision from its executives and the compensation system for executives should reflect the risk corresponding to their innovation activities.In this paper,we use 10-year financial data sample from 2004 to 2014 to investigate the relationship between the executive compensation and innovation ability by constructing innovation capacity indicators.By using SEM model,we conclude that low compensation decreases the innovation capability and this constraining effect is sustainable for at least two years.Experienced and well-educated executives contribute more to the innovation ability accumulation.

Key words: automobile industry, executive compensation, innovation capability, enterprise value

Zhang Yueyan, Li Xianjun, Meng Xiangying, Wei Xianhua. Research on the Impact of Executive Compensation on Innovation Capability in the Automobile Industry[J]. , 2017, 29(6): 106-117.

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