Efficiency Wages as Gift Exchange: Evidence from Corporate Innovation in China
53 Pages Posted: 17 Aug 2019
Date Written: August 28, 2018
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
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