Efficiency Wages as Gift Exchange: Evidence from Corporate Innovation in China

53 Pages Posted: 17 Aug 2019

See all articles by Dongmin Kong

Dongmin Kong

Department of Finance, Huazhong University of Science and Technology; School of Finance, Zhongnan University of Economics and Law

Yanan Wang

Zhongnan University of Economics and Law

Jian Zhang

School of Business and Management, Shanghai International Studies University

Date Written: August 28, 2018

Abstract

This paper provides evidence on the positive impact of rank-and-file employees’ relative wages on corporate innovation in terms of patent quantity and quality. This impact is reinforced in firms with a large proportion of skilled employees and a high R&D intensity, thereby confirming the retention effect of efficiency wages rather than the substitution effect of labor-saving technologies. Further analysis reveals that the attraction and motivation of high relative wages to talents appears to be plausible underlying mechanisms. The results highlight the importance of rank-and-file employee human capital on technological innovation.

Keywords: Efficiency Wage; Corporate Innovation; Human Capital

JEL Classification: J24; J31; O31

Suggested Citation

Kong, Dongmin and Wang, Yanan and Zhang, Jian, Efficiency Wages as Gift Exchange: Evidence from Corporate Innovation in China (August 28, 2018). Available at SSRN: https://ssrn.com/abstract=3437225 or http://dx.doi.org/10.2139/ssrn.3437225

Dongmin Kong

Department of Finance, Huazhong University of Science and Technology ( email )

Wuhan, Hubei 430074
China

School of Finance, Zhongnan University of Economics and Law ( email )

Wuhan, Hubei 430073
China

Yanan Wang (Contact Author)

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
Wuhan, Hubei 430073
China

Jian Zhang

School of Business and Management, Shanghai International Studies University ( email )

550 Dalian Road (West)
Shanghai, Shanghai 200083
China

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