Employee Follow-on Investment And Enterprise Substantive Innovation

In the government Work report delivered in March 2015,Premier Li Keqiang proposed to accelerate the implementation of the innovation-driven development strategy and build a new "engine" for China’s economic development.The Fifth Plenary Session of the 19 th Central Committee of the Communist Party of China once again put forward clear requirements for the innovation ability of Chinese enterprises in order to promote the transformation and upgrading of our economy.The 2022 government Work report also stressed the need to further increase incentives for enterprises to innovate.As an important subject of innovation activities,enterprises play multiple roles in improving national innovation ability.Nowadays,how to reasonably and effectively develop human capital and tap the potential of employees is the key challenge for enterprises to enhance their innovation ability.At the same time,high-quality development requires enterprises to avoid "innovation bubble" and pay attention to substantive innovation while pursuing the improvement of innovation ability.In view of this,the emerging employee investment mechanism began to come into view.In September 2015,Hikvision released the Management Measures for Core Employee Investment Innovation Business.In 2016,Hikvision implemented the employee investment model for the first time in its innovation business.In June of the same year,The State Council issued the Opinions on Several Policy Measures to Vigorously Promote Mass Entrepreneurship and Innovation,proposing to explore the shareholding and co-investment of core teams of state-owned venture capital enterprises and venture capital management enterprises.In this context,employee follow-on investment has gradually taken root in the practice of Chinese enterprises,and its application trend is increasing,gradually spreading from the field of venture capital to the real economy fields such as high and new technology and manufacturing.Different from traditional employee incentive methods such as employee stock ownership plan and stock option,employee follow-on investment mechanism,as a mechanism with both incentives and constraints,can make employees become "business partners" who share the risks and benefits of innovation and entrepreneurship with enterprises,which is a modern enterprise’s emphasis on the value effect of human capital in the process of enterprise innovation.Using A sample of A-share listed companies in Shanghai and Shenzhen from 2006 to2020,this thesis studies and analyzes the impact of employee follow-on investment on corporate substantive innovation.The results show that in listed companies that have not implemented employee follow-on investment,the latter’s substantive innovation output is higher than that of those that have.Further analysis of the effect channels shows that talent professionalism and risk-taking level are the main channels to promote the substantive innovation of enterprises,and talent professionalism and risk-taking will strengthen the positive correlation between employees’ investment and the substantive innovation of enterprises.At the same time,the heterogeneity analysis shows that the promotion effect of employee follow-on investment on enterprise substantive innovation is more significant in non-state-owned enterprises and in the fierce market competition environment.Finally,based on the above research conclusions,this thesis puts forward the following policy suggestions for the effective implementation and implementation of employee follow-on investment from the two dimensions of government and enterprise.At the government level:(1)positive publicity and guidance should be provided to promote the popularity of employee follow-on investment,support qualified enterprises,especially those in the initial stage,to strengthen the understanding of employee follow-on investment and promote the application and implementation of employee follow-on investment in enterprises;(2)Specialized external supervision mechanism and relevant policies and norms should be formulated to strengthen the supervision of the employee investment mechanism,protect the interests of the employee investment mechanism and avoid negative impact on the market.At the enterprise level:(1)the time of follow-investment should be set reasonably according to project objectives and enterprise development needs,which should not be too long or too short,so as to maximize the substantive innovation effect of the follow-investment mechanism;(2)We should further refine and optimize the specific division of follow-investment personnel,do a good job in the specific application of compulsory follow-investment for core key employees and voluntary follow-investment for ordinary employees,and reasonably select the follow-investment personnel;(3)Project-specific analysis should be carried out,and the operation mode of follow-investment should be carefully selected according to the characteristics of different innovation investment projects.Other incentive mechanisms and internal supervision and assessment mechanisms can be introduced when necessary to better play the implementation effect of staff follow-investment.The research results of this thesis can expand the literature on employee and investment,enrich the theory of employee motivation and provide a new research direction.In practice,it can be used to guide the application and improvement of employee follow-on investment,and provide reference for enterprises implementing or preparing to implement employee follow-on investment.Finally,employee motivation is an important starting point for enterprise innovation and development.Whether employees can shoulder this heavy responsibility and bring positive impact on enterprise substantive innovation is an issue of great concern to both companies and investors.Therefore,from the perspective of "high-quality" innovation,this thesis explores the impact of employee investment on the substantive innovation of enterprises,which has important guiding significance for achieving a high level of self-reliance and vigorously building an innovative country.