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Monetary incentives and innovation in Chinese SMEs

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  • Daniel Shapiro
  • Yao Tang
  • Miaojun Wang
  • Weiying Zhang

Abstract

We investigate the impact of monetary incentives on the innovation performance of a unique sample of private Chinese SMEs. Building on an agency-theoretic framework, we find evidence that firm-specific incentives matter, but their impact is contingent on the nature of the incentive, the employees at whom it is directed, and the measure of innovation employed. However, contrary to our hypothesis and the evidence in other countries, we find that pay-for-performance measures for managers positively impact patenting activity. This result is inconsistent with agency theory and reflects the Chinese institutional environment, notably state incentives for innovation.

Suggested Citation

  • Daniel Shapiro & Yao Tang & Miaojun Wang & Weiying Zhang, 2017. "Monetary incentives and innovation in Chinese SMEs," Asian Business & Management, Palgrave Macmillan, vol. 16(3), pages 130-157, July.
    • Handle: RePEc:pal:abaman:v:16:y:2017:i:3:d:10.1057_s41291-017-0017-3
    DOI: 10.1057/s41291-017-0017-3
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    2. Xin Chen & En Xie & Marc Van Essen, 2021. "Performance feedback and firms’ R&D frequency: a comparison between state-owned and private-owned enterprises in China," Asian Business & Management, Palgrave Macmillan, vol. 20(2), pages 221-258, April.
    3. Lou, Zhukun & Wang, Chong & Liu, Yaxin & Xu, Jing, 2023. "It takes two to tango: Impact of salary co-movement between top executives and ordinary employees on corporate innovation," Finance Research Letters, Elsevier, vol. 55(PB).
    4. Raghavan J. Iyengar & Malavika Sundararajan, 2019. "Is Firm Innovation Associated With Corporate Governance?," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(03), pages 1-24, April.
    5. Xiaohua Zhao & Yuhuang Zheng & Fang Wan, 2020. "Unrelated efforts trigger wishful winning? The impact of extraneous efforts on judgments of winning probability among Chinese consumers," Asian Business & Management, Palgrave Macmillan, vol. 19(5), pages 560-581, November.
    6. Lutao Ning & Dylan Sutherland & Xiaolan Fu, 2017. "Local context and innovation in China," Asian Business & Management, Palgrave Macmillan, vol. 16(3), pages 117-129, July.

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