Ceo incentives, innovation, and performance in technology-intensive firms: A reconciliation of outcome and behavior-based incentive schemes

Marianna Makri, Peter J. Lane, Luis Gomez-Mejia

Research output: Contribution to journalArticlepeer-review

114 Scopus citations

Abstract

Building on the agency view of corporate governance, we propose that technology-intensive firms use both outcome and behavior-based performance criteria for rewarding CEOs. Using a sample of 206 firms from 12 U.S. manufacturing industries, we find that as technological intensity increases CEO bonuses are more closely linked to financial results and that total CEO incentives are associated with two indicators of desirable innovation behaviors: invention resonance and science harvesting. Invention resonance refers to the impact a firm 's inventions have on other firms' inventions, while science harvesting reflects a firm's commitment to scientific research. As technological intensity increases, aligning bonus with financial results, total incentives with invention resonance, and total incentives with science harvesting predict firm market performance.

Original languageEnglish (US)
Pages (from-to)1057-1080
Number of pages24
JournalStrategic Management Journal
Volume27
Issue number11
DOIs
StatePublished - Nov 1 2006

Keywords

  • Executive compensation
  • Innovation
  • Performance
  • Science
  • Technology

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

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