Articlegreen2011

Motivating Innovation

1,976 citations0/0 files storedThe Journal of Finance

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Corporate Finance and Governance Accounting and Organizational Management Organizational Management and Leadership

Abstract

ABSTRACT Motivating innovation is important in many incentive problems. This paper shows that the optimal innovation‐motivating incentive scheme exhibits substantial tolerance (or even reward) for early failure and reward for long‐term success. Moreover, commitment to a long‐term compensation plan, job security, and timely feedback on performance are essential to motivate innovation. In the context of managerial compensation, the optimal innovation‐motivating incentive scheme can be implemented via a combination of stock options with long vesting periods, option repricing, golden parachutes, and managerial entrenchment.

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References

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Cited by

2013Innovation and Institutional Ownership 2013Financial development and innovation: Cross-country evidence 2013The dark side of analyst coverage: The case of innovation 2011Tolerance for Failure and Corporate Innovation 2010Fifty Years of Empirical Studies of Innovative Activity and Performance 2012Do financing constraints matter for R&D?2016Independent boards and innovation

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