Incentivizing managers to build innovative firms |
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| Authors: | Laarni Bulan Paroma Sanyal |
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| Institution: | (1) College of Business Administration, University of Toledo, 2801 W. Bancroft Street, Toledo, OH 43606-3390, USA;(2) University of Connecticut, 2100 Hillside Road Unit 1041, Storrs, CT 06269-1041, USA |
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| Abstract: | We investigate whether the equity-linked components of top executive pay have an effect on patenting activity within a firm.
We find a positive relationship between firm patenting activity and managerial alignment incentives created by stock and stock
option grants. Prior work has shown that the market value of a firm reflects the value of its patents. Thus, our finding suggests
innovation is one such channel through which equity alignment incentives positively impact firm value. On the other hand,
we find that the risk-taking incentive from stock options does not increase patenting. |
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