Journal of Guangdong University of Technology ›› 2022, Vol. 39 ›› Issue (04): 55-65.doi: 10.12052/gdutxb.210171

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Internal- and External-Firm Pay Gap: The Comparison and Interaction of Incentive Effectiveness

Peng Zhen1, Peng Zu-qun2, Chen Xiu-de1   

  1. 1. School of Management, Guangdong University of Technology, Guangzhou 510520, China;
    2. School of Automation, Guangdong University of Technology, Guangzhou 510006, China
  • Received:2021-11-05 Online:2022-07-10 Published:2022-06-29

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Abstract: Both internal- and external-firm pay gap are the two important aspects of employee compensation comparison. However, most of the existing literature has studied the incentive effect of internal- and external-firm pay gap separately, and paid insufficient attention to the combination, interaction and boundary between the two. Based on the samples of A-share industrial listed companies in China, the incentive effect and interactive relationship between internal- and external-firm pay gap are analyzed. The results show that: (1) Both internal- and external-firm pay gap have significant influences on corporate innovation efficiency separately. When integrating the two facts in one model, the inhibiting effect of internal-firm pay gap on corporate innovation efficiency is still significant, while the positive incentive effect of external-firm pay gap becomes insignificant. In order to control endogenous problem, the three-stage least square method in simultaneous equation model is used for regression, and the results are consistent with the above. (2) About the incentive effect of pay gap, there are significant differences in different types of enterprises. Specifically, in non-state-owned enterprises and enterprises with low salary level, internal-firm pay gap plays no significant role, while external-firm pay gap can significantly promote the improvement of corporate innovation efficiency. In state-owned enterprises and enterprises with high salary level, it is exactly the opposite. Internal-firm pay gap has a significant inhibiting effect on corporate innovation efficiency, while external-firm pay gap has no significant effect. Thus the research on compensation and corporate innovation incentive is expanded and enriched and has a strong enlightenment significance to the actual enterprise decision-making.

Key words: pay gap, internal-firm pay gap, external-firm pay gap, corporate innovation efficiency

CLC Number: 

  • F272.3
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