Effects of External Competitive Compensation Disparities on Corporate Innovation: A Signaling Game Analysis of Manufacturing Enterprises
Chuyi Fang, Yuting Wang
Keywords:
external competitive compensation disparities, corporate innovation, signaling games, manufacturing sector
Abstract:
faced with the dilemma of core technology being controlled by others and a lack of talent in innovation. Manufacturing enterprises raise their salaries to attract talent. However, enterprises may face the problem of untruthful employees. Therefore, how to set an external competitive salary gap that can not only distinguish innovative employees from non-innovative employees, but also maximize innovation profits, has become a valuable question. In this paper, employees are divided into innovative and non-innovative groups. Based on signaling theory, we establish a theoretical model about the impact of external competitive salary gap on the innovation of manufacturing enterprises, and introduce the lying utility function and Cobb Douglas production function to analyze two effects under different equilibrium conditions—the talent screening effect and the output incentive effects. Then, combined with the data of manufacturing competitive enterprises, we further analyze how these effects will change when the characteristics of regional labor market changes. The findings show that, when the competitive salary gap is wider, enterprises are more likely to screen innovative employees from non-innovative ones. Besides, the output incentive effect exists in both pooling and separating equilibria, and intensifies as the proportion of innovative employees increases, and the competitive salary gap widens.
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 Effects of External Competitive Compensation Disparities on Corporate Innovation: A Signaling Game Analysis of Manufacturing Enterprises [PDF file] [Filesize: 1.25 MB]
 10.7441/joc.2024.04.08
Fang, Ch., & Wang, Y. (2024). Effects of External Competitive Compensation Disparities on Corporate Innovation: A Signaling Game Analysis of Manufacturing Enterprises. Journal of Competitiveness, 16(4), 150-175. https://doi.org/10.7441/joc.2024.04.08
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