Creating incentives for innovation? the relationship between pay dispersion in R&D groups and firm innovation performance

Yoshio Yanadori*, Victor Cui

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

65 Citations (Scopus)

Abstract

Innovation is a critical organizational outcome for its potential to generate competitive advantage. While the contribution of knowledge workers to the generation of innovation is widely recognized, little is known about how organizational incentive mechanisms stimulate or inhibit these workers' behaviors that promote innovation. This study examines the relationship between pay dispersion in R&D groups and firm innovation using employee-level compensation data in US high-technology firms. The results show that (1) pay dispersion in R&D groups is negatively related to firm innovation and (2) this negative relationship is alleviated in firms with greater financial slack. This study contributes to the innovation literature by illuminating the implications of organizational incentive systems for successful innovation.

Original languageEnglish
Pages (from-to)1502-1511
Number of pages10
JournalStrategic Management Journal
Volume34
Issue number12
DOIs
Publication statusPublished - 2013 Dec
Externally publishedYes

Keywords

  • R&D employees
  • high-technology firms
  • human capital management
  • innovation
  • pay dispersion

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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