Did Western CEO Incentives Contribute to China’s Technological Rise?

55 Pages Posted: 26 Oct 2021 Last revised: 6 Dec 2021

See all articles by Bo Bian

Bo Bian

University of British Columbia

Jean-Marie Meier

University of Texas at Dallas

Date Written: October 1, 2020

Abstract

We study the role of Western CEO incentives in fostering the technological rise of China. Due to China's quid pro quo policy, foreign multinationals face a trade-off between the short-term benefits of accessing China's vast market and the long-term costs of transferring technology to China. Leveraging microdata on the global patent network, we construct novel measures to describe technological interactions between US firms and over 70 countries. We find that firms managed by CEOs with high-powered incentive contracts form more partnerships with China and transfer more technology to China. These firms subsequently lose R&D human capital to China and face more patenting competition from China, suggesting negative long-term consequences in innovation. The evidence is consistent with the myopia-inducing instead of the effort-inducing property of high-powered CEO incentives. The paper reveals an important real effect of CEO incentives and highlights a novel channel behind China's technological catch-up.

Keywords: Managerial compensation, CEOs, myopia, innovation, technology transfer, patents, China

JEL Classification: F21, F23, F61, G34, O33, O34

Suggested Citation

Bian, Bo and Meier, Jean-Marie, Did Western CEO Incentives Contribute to China’s Technological Rise? (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3949536 or http://dx.doi.org/10.2139/ssrn.3949536

Bo Bian (Contact Author)

University of British Columbia ( email )

HA 865, UBC Sauder School of Business
2053 Main Mall, Vancouver, BC V6T 1Z2
Vancouver, British Columbia V6T 1Z2
Canada

HOME PAGE: http://bo-bian.com/

Jean-Marie Meier

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Road
Richardson, TX 75080
United States

HOME PAGE: http://www.jean-mariemeier.com/

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