Executive-Employee Pay Gap And Corporate Innovation

Since the 18 th CPC National Congress,our country has raised its innovation strategy to an unprecedented level.Our country continues to increase R&D investment.In 2018,China's R&D investment reached 1.97 trillion,accounting for2.18% of GDP.In the 2018 Global Innovation Index Country Ranking released by the World Intellectual Property,China rose from 23 rd to 17 th in 2017,and is the only developing country to enter the top 20.China continues to rise in 2019,ranking14 th.China ranks among the top in the world in terms of the number of patents,the number of industrial designs,the number of trademarks,and high-tech exports.The reason why China's R&D input and patent output have been outstanding in recent years,and the ranking of innovation index has risen rapidly is because China attaches great importance to innovation-driven economic development and transformation,transitioning from labor-intensive to knowledge-intensive industries and has achieved significant effect.But compared with developed countries,China still has huge development potential in terms of innovation.Innovation is a symbol of a nation's progress,the driving force behind a country's prosperity,and the backbone of the survival and development of modern enterprises.Therefore,it is important to encourage Chinese enterprises to carry out independent innovation.There are many factors affecting corporate technological innovation.Social and cultural values,industrial policy support,intellectual property protection,enterprise scale,corporate R&D funds and talent investment,and the company's own governance structure will all have important impacts on technological innovation.In recent years,the topic of income gap between executives and ordinary employees has been controversial and has been valued by relevant departments.The Chinese government has successively issued policies to control the excessive salary of executives.In 2009,the six central ministries and commissions jointly issued the "Opinions on Further Regulating the Remuneration Management of the Heads of Central Enterprises",which stipulates that the upper limit of remuneration for executives of central enterprises shall not exceed 20 times the average salary of ordinary employees.The pay gap between executives and employees has also received widespread attention in other countries.The pay gap is the performance of the company's internal pay system,and it is also a reflection of the corporate governance mechanism.The arrangement of company personnel compensation will affect the enthusiasm of executives and employees,which will have a direct impact on corporate performance and innovation.Therefore,research on the relationship between executive-employee pay gaps and corporate technology innovation can not only provide empirical experience for the income gap issue,but also provide reference for how to stimulate the innovation vitality and competitiveness of Chinese enterprises under the current Sino-US trade friction.The theroy of this paper is the principal-agent theory,championship theory and behavior theory.This paper studies the impact of the pay gap between executives and employees on the innovation of enterprises by using the method of normative andempirical research.Based on the nature of property rights and industry differences,the group examined the impact of executive-employee pay gaps on corporate innovation in different types of companies.This article cites the data of our country's A-share non-financial listed companies from 2010 to 2018 to perform multiple regression analysis on the relationship between the executive-employee pay gap and corporate innovation.The result shows that the executive-employee pay gap of listed companies in China currently has an interval effect on corporate innovation.When the pay gap is in a small range,the pay gap has a positive impact on corporate innovation.When the pay gap exceeds a certain range,the pay gap has a negative impact on corporate innovation.This article is further tested based on the nature of property rights and industry differences.The result shows that executive-employee pay gap and corporate innovation have an inverted "U" relationship in both state-owned and private enterprises.The optimal pay gap of state-owned enterprises is lower than that of private enterprises.The higher the technological content of the industry,the more obvious the "U" relationship between executive-employee pay gap and corporate innovation.And the optimal pay gap between executives and employees is lower.The results of this paper are not only a breakthrough to the previous conclusion about the linear relationship between the pay gap and corporate innovation,but also revealed that industries with different technological contents,the sensitivity of the inverted “U” relationship between executive-employee pay gap and corporate innovation is different,thus broadening the theory of factors affecting corporate innovation as a whole.On the other hand,this article attempts to give the optimal salary gap between executives and employees by examining the inverted “U” shaped peaks,and makes a comparison between different enterprise natures and industries.This also enriches the optimal compensation contract theory of executives of listed companies.According to the research in this article,we can get some inspiration.First,establishing a reasonable and effective salary system.Properly widening the pay gap can enable both executives and employees to be effectively motivated,which is beneficial to corporate innovation activities.However,if the pay gap is too large,it will weaken the confidence of ordinary employees and reduce their enthusiasm for work,which will eventually inhibit the innovation activities of enterprises.Therefore,it is necessary to widen the pay gap within a reasonable range,increase the enthusiasm of corporate executives and employees to participate in R&D and innovation activities,and stimulate the innovation vitality of enterprises.Then,making a targeted compensation policy.Enterprises should formulate pay policies in accordance with the nature of their property rights and the industries they work in.Special attention should be paid to the formulation of compensation policies for executives-employee pay gaps that have significant interval effects on corporate innovation.