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

Zhongnan University of Economics and Law

Yanan Wang

Zhongnan University of Economics and Law

Jian Zhang

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

Zhongnan University of Economics and Law ( email )

No.143, Wuluo Road
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

Shanghai International Studies University ( email )

550 Dalian Road (West)
Shanghai, Shanghai 200083
China

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