IMPACT OF EXECUTIVE COMPENSATION INCENTIVES ON CORPORATE INNOVATION PERFORMANCE: ANALYSIS OF THE MEDIATING EFFECT BASED ON R&D INVESTMENT

Abstract

Innovation-driven development relies on enterprises as the primary agents of innovation, with talent being the cornerstone of corporate innovation. As the principal custodians of innovation within enterprises, executive incentives are regarded as a crucial mechanism for resolving principal-agent conflicts and enhancing corporate innovation performance. This study examines the impact of executive compensation incentives on corporate innovation performance and its underlying mechanisms, using Chinese A-share listed companies from 2014 to 2023 as the research sample. Findings reveal that executive compensation incentives exert a significant positive influence on substantive innovation performance, strategic innovation performance, and overall innovation performance, with the most pronounced effect observed on strategic innovation. Executive compensation incentives can increase corporate output in substantive and strategic innovation by promoting greater investment in R&D personnel and capital. R&D investment partially mediates the relationship between executive compensation incentives and corporate innovation performance. Heterogeneity analysis reveals that executive compensation incentives exert a stronger influence on innovation performance in enterprises located in eastern and central regions, as well as in non-state-owned enterprises. Consequently, companies should implement targeted executive incentive schemes tailored to their regional characteristics, ownership structure, and specific developmental requirements.