Myth or reality? Assessing the moderating role of CEO compensation on the momentum of innovation in R&D

This study researches the influences of CEO compensation on firm behavior to examine the interactive relationship between the behavioral momentum of innovation in R&D and CEO compensation. The models presented in this study are based on evolutionary, institutional, and agency theories to test hypotheses using data from 107 companies in the high-technology sectors in the United States. The results indicate that the pre-succession innovative behavior of these high-technology firms on R&D can positively affect these firms' post-succession innovative behavior towards R&D. That is, positive momentum in R&D innovation prevails in a firm across a change of the CEO. However, for the role of CEO compensation, short- and long-term compensation does not positively moderate this behavioral momentum in R&D. Hence, the moderating impact of short- and long-term CEO compensation to enhance the momentum of innovation in R&D can be romanticized. These findings provide boards of directors with evidence as to how a CEO succession matters to a firm's behavioral momentum in R&D, and whether CEO compensation can be strategized to change a firm's innovation and momentous behavior.