Vertical Pay Dispersion and Innovation Spirit of New Ventures

Yang Chan, He Xiaogang, Zhu Lina, Wang Bolin

Journal of Finance and Economics Vol. 43, Issue 07, pp. 32 - 44,69 (2017)  DOI:10.16538/j.cnki.jfe.2017.07.003

Abstract

How differentiated salary management policies affect the innovation spirit of new ventures is an important academic issue. Considering that there is no much comparability of the pay between corporate executives and grassroots employees, this paper subdivides the pay dispersion of new ventures into two levels:pay dispersion between top managers and middle managers (PayDHM), and pay dispersion between middle managers and grassroots workers (PayDML). And it explores the effects of vertical pay dispersion at different levels on innovation activities of new ventures. The results indicate that there exists a significant inverted U-shaped relationship between vertical pay dispersions and the innovation spirit of new ventures, which means that the innovation spirit of new ventures increases first and then decreases as the vertical pay dispersion widens. In addition, the role of pay dispersion between middle managers and grassroots workers in the innovation spirit of new ventures is also affected by board governance and external environment inclusiveness, that is to say at the same level of pay dispersion between middle managers and grassroots workers, new ventures with a board of directors and in a strong inclusive environment have stronger innovation spirit. It extends the achievements of pay dispersion theory research and has important significance to help new ventures to formulate and perfect pay incentives policies.

Keywords

new venture; innovation spirit; pay dispersion; corporate governance; environmental inclusiveness