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Managerial incentives, CEO characteristics and corporate innovation in China's private sector
Journal of Comparative Economics
  • Chen LIN, Chinese University of Hong Kong, Hong Kong
  • Ping LIN, Lingnan University
  • Frank M. SONG, University of Hong Kong, Hong Kong
  • Chuntao LI, Zhongnan University of Economics and Law, Wuhan, China
Document Type
Journal article
Publication Date
Academic Press
  • Corporate innovation,
  • Managerial incentives,
  • CEO characteristics

We use a unique World Bank survey of 1,088 private manufacturing firms from 18 Chinese cities over the period 2000 to 2002 to empirically examine the roles of managerial incentives and CEO characteristics in a firm’s innovation activities. We look at both innovation effort (R&D intensity) and innovation performance measures such as new product sales. We obtain the following main results: (1) the presence of CEO incentive schemes increases both corporate innovation effort and innovation performance; (2) sales-based performance measures in the incentive scheme, as compared with profit-based performance measure, are more conducive to firm innovation; and (3) CEO education level, professional background and political connection are positively associated with firm’s innovation efforts. The main results are robust to endogeneity tests with instrumental variables. We also discuss some important policy implications.

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Copyright © 2010 Association for Comparative Economic Studies Published by Elsevier Inc.

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Citation Information
Lin, C., Lin, P., Song, F. M., & Li, C. (2011). Managerial incentives, CEO characteristics and corporate innovation in China's private sector. Journal of Comparative Economics, 39(2), 176-190. doi: 10.1016/j.jce.2009.12.001