Articlehybrid1995

Business unit innovation and the structure of executive compensation

Robert W. Holthausen · David F. Larcker · Richard G. Sloan

207 citations0/0 files storedJournal of Accounting and Economics

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Corporate Finance and Governance Accounting and Organizational Management Firm Innovation and Growth

Abstract

We examine whether the structure of compensation for the divisional CEO is related to subsequent innovative activity within the division, and whether the divisional CEO's compensation is structured as a function of the expected innovation opportunity set facing the division. Both the expected innovation opportunity set and the divisional executive's compensation contract are treated as endogenous variables by adopting a simultaneous equation approach. We find modest evidence that the proportion of total compensation tied to long-term components has a positive relation with future innovation, but no evidence that this proportion has a positive relation with the expected innovation opportunity set.

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References

1997Capitalism, Socialism and Democracy 1943Capitalism, Socialism and Democracy.1971Industrial Market Structure and Economic Performance.1990Patent Statistics as Economic Indicators: A Survey 1992The investment opportunity set and corporate financing, dividend, and compensation policies 1959The Simple Economics of Basic Scientific Research 1990A Penny for Your Quotes: Patent Citations and the Value of Innovations 1989From Competitive Advantage to Corporate Strategy

Cited by

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