Top Management Team Pay Gap,political Connections And Corporate Innovation

Since the 18 th National Congress of the Communist Party,China has insisted on taking innovation as the first driving force for development,and promoting the scientific and technological strength from quantitative accumulation to a qualitative leap.In the face of the current ups and downs of the global epidemic situation and the bumpy road ahead for the recovery of the world economy,only by enhancing the awareness of innovation,adhering to the strategy of innovation,and actively promoting innovative practices,enterprises can make steady and long-term progress,firmly hold the development initiative in their own hands,enhance international competitiveness and the ability to resist risks in response to global environmental changes.As executives are the key to promoting the innovation and development of enterprises,the salary gap within the executive team will directly affect the psychology and behaviors of all members,which in turn will have an impact on the innovation performance of the enterprise.Therefore,how to make the salary incentive mechanism of modern enterprises maximize the incentive effect on innovation performance,fully mobilize the innovation enthusiasm and creativity of high-level have become the focus of theoretical and academic circles.The incentive effect of the pay gap is also inseparable from the influence of China’s unique institutional background.In China,the government plays a leading role in resource allocation,political connections have gradually evolved into an important informal system,and the connection between private enterprises and the government is mainly established through executives.The politically connected social capital owned by key executives can help private companies obtain heterogeneous innovative resources.At this time,private companies tend to pay competitive salaries to maintain these key executives,which can affect the perception of income differences by innovation decision-makers and the collaborative atmosphere within the team to a certain extent,leading to changes in managers’ innovative behavior,and then adjusting the incentive effect of the salary gap of the executive team on innovation performance.Based on the theory of tournament salary incentives,this thesis selects the data of China’s A-share listed private companies from 2012 to 2021 as the research object,empirically studies the comprehensive incentive effect of the top management team salary gap on corporate innovation performance and the moderating effect of political connections on the relationship between the vertical salary gap of executives and innovation performance,and further explores its differences under different property rights,industry characteristics and marketization levels.The research conclusion shows that: the salary gap of the executive team can significantly improve the innovation performance of the enterprise,increase the creative output of the enterprise,and improve the innovation efficiency of the enterprise;the resource support related to the social capital of key executives and the supplementary effect on the formal system are further strengthened the positive impact of the salary gap of the executive team on innovation performance,that is,political connections can positively adjust their relationship,and it’s more pronounced is in private enterprises,high-tech enterprises and regions where the marketization process is relatively slow.After considering the lag of innovation output 、replacing variables and using the whole sample for robustness testing,the research conclusions still hold.Under the strategic deployment of strengthening the main position of enterprise innovation,this thesis enriches the research conclusions of the economic consequences of the internal salary gap,provides relevant ideas for the arrangement of the private enterprise’s internal salary system and promotes the participation of management in innovation,and further perfects the theoretical connection between the private enterprise’s internal salary incentives mechanism and external systems construction.This can prompt executives to take the initiative to make full use of social network relationships to introduce heterogeneous resources to boost the implementation of innovative projects,accelerate the output of innovation results,and can encourage executives to give full play to the supplementary role of political connections as an informal system to ensure the exclusive right to of innovation results.This also can encourage private enterprises to pay more attention to external institutional and environmental factors,optimize the salary structure system,build a salary gap that takes into account incentives and fairness,and give full play to the role of salary incentives,promote the rapid development of private enterprise innovation capabilities.At the same time,it will help the government pay attention to the benign interaction with private enterprises,improve the market economic system,balance the relationship between the government’s regulatory role and the economic role of market,improve the innovation resource allocation system and basic system construction and work hand in hand with private enterprises to empower and strengthen the continuous development of technological innovation.