A Study on the Impact of Remuneration Gap of Returnee Executives on Corporate Innovation in the Context of Digital Transformation

In the digital era, corporate executive pay is considered to be one of the important factors affecting corporate innovation. And the gap in the remuneration of returnee executives is directly related to the innovation ability and development potential of enterprises.

First of all, the gap of returnee executives’ pay is a direct economic benefit for enterprise managers, which directly affects executives’ motivation and work attitude [1-3]. If the executive pay gap is small, executives may feel the lack of work motivation, which leads to their lack of motivation for innovation work and affects the speed and depth of enterprise innovation. However, if the salary gap of returnee executives is large, the executives have more motivation and enthusiasm to promote corporate innovation and encourage employees to innovate [4-6]. The large gap in the remuneration of returnee executives will also attract more high-quality management personnel to join the enterprise, thus generating internal and external competition. These high-quality management personnel have richer management experience and knowledge, can be more visionary and innovative to lead the enterprise to stand in the forefront of the industry [7-9]. Secondly, the remuneration gap of returnee executives also has a far-reaching impact on the innovation culture of enterprises. Enterprises with a large gap in the remuneration of returnee executives are usually more capable of establishing a corporate culture that encourages innovation [10-11]. They are more willing to provide employees with innovative platforms and resource support, give employees more incentives and rewards for innovation, and create a more relaxed working environment and atmosphere for employees, so that employees have more motivation and confidence to pursue technological innovation. Furthermore, another important relationship between the remuneration gap of returnee executives and enterprise innovation lies in the impact on enterprise R&D investment. Enterprises with large remuneration gaps for returnee executives are usually more willing to invest more resources and funds in innovation and R&D [12-13]. Executives tend to be able to realize the importance of innovation to enterprise development, and they are willing to bear more risks and costs and invest more resources and funds in R&D in order to obtain the market advantages and economic benefits brought by innovation [14-15]. Finally, the remuneration gap of returnee executives is also directly related to the efficiency of enterprise management. Enterprises with a large gap in the remuneration of returnee executives usually attract more high-quality management personnel to join, and these high-quality management personnel can better promote the innovation and development of enterprises and improve the efficiency of enterprise management. Through the development of more scientific and reasonable management system and policies, the executives can stimulate the passion and innovation of the employees, and improve the management efficiency and execution of the enterprise [16-17].

Enterprises should pay more attention to the reasonable setting of the remuneration gap of returnee executives, and from a long-term perspective, guide the executives to pay better attention to innovation, improve the innovation ability of enterprises, so as to maintain the competitive advantage of the industry [18-20].

Returnee executives, with their overseas study and work experience, have a broader overseas network and master the cutting-edge knowledge of the industry as well as advanced management styles and experience, and gradually become important players in corporate innovation. The article takes the data of 950 companies listed in Shanghai and Shenzhen A-shares from 2012 to 2023 as research examples, and constructs a threshold regression model with corporate innovation ability and the remuneration gap of returnee executives as the dependent and independent variables, respectively. The impact of returnee executive pay gap on corporate innovation is verified by threshold regression, the robustness of the threshold regression results is analyzed by robustness analysis, and the heterogeneity of returnee executive pay gap on corporate innovation under different marketization degrees is explored.

2

Overview

Returnee talent is highly paid and introduced by most firms because returnee executives facilitate corporate innovation [21] and corporate labor investment efficiency [22]. In addition, literature [23] shows that returnee chief executive officers (CEOs) positively affect corporate green innovation, and literature [24] finds that executive overpayment reduces the motivation of returnee background while effectively introducing returnee talent. Whereas, literature [25] investigated that executive pay gap increased firms’ green innovation, thus promoting high-quality development, and CEO pay regulation negatively moderated the impact of returnee executives on firms’ innovation level [26]. The pay gap among executives, while increasing corporate innovation, may also reduce cross-border M&A sustainability [27], and the larger the executive pay gap the lower the level of innovation instead [28]. In addition, literature [29] found that the number of executives with overseas experience is positively related to the pay gap, while executive overseas experience is positively related to the internal and external pay gap. And literature [30] mentions that firms with higher executive compensation have a lower risk of bankruptcy. However, the gender-specific pay gap among executives clearly exists, which not only affects the motivation of female employees, but also affects the company. Literature [31] study just shows that too much pay gap between male and female executives in the executive team reduces firm performance. While literature [32] shows that companies with a high percentage of women on the board of directors have a smaller pay gap. It is evident that there should be no gender discrimination in the pay gap for executives. In addition, literature [33] study shows that the pay gap between CEOs and subordinate executives is conducive to corporate digital transformation, which is conducive to corporate innovation, and executive equity incentives are conducive to corporate digital transformation innovation [34]. However, literature [35] found an inverted u-shaped association between returnee executives and corporate digital transformation, which is weakened by corporate financial status. Therefore, the remuneration gap between returnee executives should be set reasonably to prevent corporate innovation from being weakened in the context of digital transformation.

3

Theoretical analysis

As corporate decision makers and managers, management has an important influence on the internal compensation system of an enterprise, and this role is significantly dependent on the cognitive patterns and decision-making preferences of individual executives. Since executives with overseas experience are deeply imbued with Western culture, their behavioral patterns are more inclined to the distribution system of Western societies, and the management experience and learning experience given to executives by their overseas experience will further encourage executives to adopt the widening of the pay gap in order to enhance the innovative performance of the firm.

3.1

Remuneration Gap for Returnee Executives

As an important element in the remuneration incentive mechanism of listed enterprises, the remuneration gap of returnee executives is extremely important for the sustainable development of enterprises. Among the various influencing factors, the remuneration gap of returnee executives plays a very important role in motivating the risk-taking willingness and behavior of individual executives, and the setting of a reasonable remuneration gap of returnee executives not only improves the management level of executives, but also effectively enhances the efficiency of internal governance of the enterprise, and promotes the enterprise’s innovation ability [36]. Considering the availability of compensation data and the actual situation of listed enterprises’ disclosure of executive compensation, this paper mainly defines the monetary compensation in explicit compensation. Existing research points out that executive compensation originates from the performance system, and a reasonable executive compensation system is a system that attracts excellent executives and helps them exercise their management ability. The remuneration gap of returnee executives in enterprises often refers to the remuneration differences within the collective, which can be divided into two different types of remuneration gaps, one is the vertical remuneration gap between different job levels, and the other is the horizontal remuneration gap within the same job level, and the remuneration gap of returnee executives in the study of this paper is the horizontal remuneration gap between the same management levels.

In summary, based on the research of scholars and the seafarer executives’ remuneration data disclosed in the database of Cathay Pacific, this paper defines the concept of seafarer executives’ remuneration gap as the remuneration gap between the core executive level and the non-core executive level.

3.2

Overview of enterprise innovation

Innovation is a process of combining factors and conditions of production and introducing them into the production system. Innovation as the establishment of a new production function, it can not simply be equated with technological invention, but a non-stop running mechanism, only when the new technological invention is applied to the production and management activities of the enterprise, it is innovation. The concept of innovation includes five parts, namely product innovation, process innovation, market area innovation, material supply source innovation, and institutional innovation [37].

Most current scholars mainly measure enterprise innovation through the perspectives of innovation input and innovation output. Common measures of innovation input indicators include R&D expenditures, while common measures of innovation output indicators include the number of patents, new product sales revenue, and new product sales rates. In addition to the use of patents or products and other innovation output quantity, some scholars have also paid attention to the quality of the enterprise’s innovation output, that the number of inventions in the patents compared to other patents in the type of application is a direct embodiment of the enterprise’s scientific research and innovation hard power. It has a higher technical value and needs to be novel, creative, and practical at the same time, which is a better measure of the quality of enterprises’ scientific research output and the level of market application. Some scholars also measure the input-output ratio of enterprise innovation through innovation efficiency, such as the ratio of sales of innovative products to R&D expenditures or total sales. In this paper, we combine input and output indicators, and use both innovation output results and innovation efficiency to overcome the single and distortion of science and technology innovation indicators and to measure the innovation performance of enterprises in a relatively comprehensive way.

3.3

Returnee Executives’ Pay Gap and Firm Innovation

For returning executives, tournament theory suggests that the wider the pay gap is more effective in motivating executives to take responsibility, invest more time and energy, and bring more opportunities for corporate innovation. With the increasing pay gap, the confidence of returnee executives in crisis management increases, which is conducive to the executives to come up with problem-solving strategies and lead their subordinate employees to work together in the same boat and fight side by side. The lower pay gap makes the returnee executives lack the enthusiasm to lead their employees to overcome difficulties together. Although a smaller pay gap can motivate employees to be enthusiastic, with only enthusiastic employees and no leadership to guide them through organizational difficulties, there is a certain obstacle for enterprises to achieve innovation. Only if the returnee executives and employees reach the same goal and work together, can the enterprise innovation ability be improved [38].

The enhancement of enterprise innovation capability is what every enterprise is looking forward to. If enterprises want to better cope with the market competition, the guidance of employees’ emotions and the effective coping strategies proposed by the management are crucial, and the remuneration gap of returnee executives plays a leading role in the employees’ emotions and the management’s self-confidence. A smaller gap in the remuneration of returnee executives enhances employees’ sense of security, eliminates their negative emotions, and strengthens their determination to work together with returnee executives, which helps enterprises realize innovation as soon as possible. A larger gap in the compensation of returnee executives will enhance their decision-making power and leadership abilities, so that they can lead all employees to achieve the same goal and work together. Therefore, this paper concludes that when the remuneration gap of returnee executives gradually increases, the tournament theory plays a dominant role and positively promotes the realization of innovation in enterprises. However, after the salary gap of returnee executives increases to a certain extent, employees feel that they are not the participants in the crisis environment, which produces obvious sense of exploitation and negative emotions, and is not conducive to the better implementation of innovation-related programs and work of the enterprise.

Based on the above analysis, the following research hypotheses are proposed:

H1: There is a threshold effect of returnee executives’ pay gap on enterprise innovation ability, i.e., returnee executives’ pay gap has a positive promotion effect on enterprise innovation before the critical value, while returnee executives’ pay gap has a negative effect on enterprise innovation after crossing the critical value.

4

Research design

Enterprises are the cells of the social economy, and high-quality economic development needs to be realized through enterprise innovation. Talents, as the “pillars of the country”, play a crucial role in the process of enterprise innovation and development, and the selection and recruitment of senior management talents is an important factor in enhancing the innovation ability of enterprises. With the continuous influx of returnee talents into the public eye, the role of returnee executives in the development of enterprise operations has also been increasingly concerned by academia and the industry. Returnee executives can apply their knowledge and ability gained overseas to their work, and their accumulated international experience can increase the enterprise’s knowledge of the international market and improve the international market commitment and internationalization level. The introduction of returnee executives can reduce the over-investment behavior of enterprises and improve the efficiency of enterprise innovation. It effectively reduces connected transactions and improves the level of governance, as well as improving efficiency, promotes technological progress, and increases the total factor productivity of innovation.

4.1

Data sources and threshold models

4.1.1

Sample data sources

This paper selects A-share listed companies in Shanghai and Shenzhen from 2012 to 2023 as the original sample, and the data on executive compensation, employee compensation, characteristics of executives’ overseas backgrounds, and corporate performance used in the sample companies are all taken from the database of Cathay Pacific (CSMAR), and combined with the official website of the company and the annual report for the data complementary processing. Other financial information and corporate governance data of the company are taken from the Cathay Pacific (CSMAR) database. Screening sample data: 1)

Referring to the existing research to screen innovative companies, i.e., companies with positive ROA from 2014-2021 and ROA rising more than 20% in 2022, and companies that satisfy the above two conditions at the same time are innovative companies.

2)

Delete the financial industry sample.

3)

Delete the ST sample.

4)

Delete the sample with gearing ratio greater than 1.

5)

Delete samples with negative pay gap.

After the above processing, the final sample is 950 listed companies.

4.1.2

Threshold regression models

Threshold refers to the limit of the range of something, which is also known as the critical value [39]. There are three main types of thresholds, which are single thresholds for a single variable, multiple thresholds for a single variable, and a threshold indicator model. Single threshold for a single variable refers to a model in which there is only one threshold variable and one threshold value that divides the data range into two parts. Single variable multiple threshold refers to the model, there is only one threshold variable, but more than one threshold value, such as double threshold is one of the manifestations of multiple threshold, double threshold will be divided into three parts of the data range, this model can generally better reflect the actual economy in the problem. The threshold indicator model refers to a combination of multiple variables. The threshold variable is more integrated to provide a comprehensive measure of certain indicators in the region.

Drawing on the nonlinear panel threshold proposed by Hansen for empirical analysis, the specific form of the single panel threshold model is set as follows: (1) $Y_{i t} = {\begin{array}{l} μ_{i t} + β_{1} x_{i t} + e_{i t}, q_{i t} \leq γ \\ μ_{i t} + β_{2} x_{n} + e_{t i}, q_{t i} > γ \end{array}, i = 1, 2, 3, \dots, K, n$

Y_it is the explanatory variable of the model, x_it is the explanatory variable of the model, q_it is the threshold variable, γ is the threshold value, and simplifying the above system of equations, we can obtain: (2) $Y_{i t} = μ_{i} + β_{1} x_{i t} I (q_{i t} \leq γ) + β_{2} x_{i t} I (q_{i t} > γ) + e_{i t}$

$I (\cdot)$ is the schematic function. β_i, β_i, γ are the parameters to be estimated, and OLS estimation of Eq. (1) yields the residual sum of squares, which corresponds to the minimum threshold of the residual sum of squares: (3) $γ = \arg \min S_{1} (γ)$

The estimation step for the value of γ is to first assume that the model is a single threshold model, so as to calculate the threshold value of γ₁, γ₁ is the threshold value obtained by using the least squares estimation of the minimum sum of squares of the residuals, and at this time, γ₁ is also the first threshold value of the double threshold. On this basis, the search for γ₂, γ₂ is tested in the same way as the first threshold, the second threshold γ₂ is also determined based on the minimum of the sum of squared residuals, and after determining γ₂, the threshold test is also performed for γ₂.

Eqs. (1) and (2) are for the construction of a single threshold model, however, in real life, a single threshold sometimes can not be better for a very comprehensive reflection of economic issues, so the need to establish a multiple threshold model. Take the double threshold among multiple thresholds as an example, construct the double threshold model, and the specific estimation equations expressed by the formula are as follows: (4) $\begin{array}{rcl} Y_{i t} & = & μ_{i} + β_{1} x_{i t} I (q_{i t} \leq γ_{1}) + β_{2} x_{i t} I (γ_{1} < q_{i t} \leq γ_{2}) \\ + β_{3} x_{i t} I (q_{i t} > γ_{2}) + e_{i t} \end{array}$

4.2

Variable definition and model construction

4.2.1

Definition of research variables

1)

The explanatory variable is firm innovation capability (RDD), and in existing empirical studies, R&D investment or patent output is usually used as a proxy for innovation. The focus of this paper is to examine whether and how the overseas executive pay gap affects corporate innovation, in view of which we use R&D investment intensity (the ratio of R&D expenditures to operating revenues) to measure corporate innovation capacity.

2)

The explanatory variable is the returnee executive pay gap (GAP). Referring to the existing related studies, according to the overseas executive pay information disclosed by CSMAR, if an executive meets any of the conditions, he or she is recognized as a returnee executive, with overseas study experience or with overseas work experience. And the pay gap between corporate returnee executives and employees is based on the average annual salary of returnee executives divided by the average annual salary of ordinary employees.

3)

Control variables. Referring to the existing studies, this paper selects the following variables as control variables, equity concentration (Own) is used to control the proportion of shares held by the first largest shareholder, the combination of two powers (Power), the nature of ownership (SOE), the share of fixed assets (Fixed) and the proportion of independent directors (Indratio) to measure the level of corporate governance, and the independent director is conducive to alleviating the information asymmetry between shareholders and agents. The independent directors help to alleviate the information asymmetry between shareholders and agents to promote corporate innovation and research and development. Cash, Roa and Lev measure the solvency of the firm, and firms with different solvency will invest differently in innovation and R&D. Growth indicates the development speed and development trend of the enterprise, the faster the development speed, the more the enterprise will increase innovation and R&D investment.

4.2.2

Research modeling

Due to the complexity of the relationship between multiple innovation factors and innovation subjects, innovation activities are facing many new changes, and there is uncertainty in the effect of the remuneration gap of returnee executives on the innovation capacity of enterprises. Based on the threshold regression model can well circumvent the instability of measurement results caused by the problem of mutation, therefore, this paper chooses the panel threshold model to study the effect of the returnee executives’ pay gap on the innovation capacity of enterprises. Based on the classical threshold regression model, this chapter brings the selected explanatory variables, explanatory variables, threshold variables and control variables into the panel threshold model for the corresponding variations, and obtains the following model: (5) $\begin{array}{rcl} R D D_{i t} & = & μ_{i t} + β_{1} * G A P_{i t} * I (G A P_{i t} \leq γ_{1}) + β_{2} * G A P_{i t} * I (G A P_{i t} \geq γ_{1}) \\ + β_{3} \sum C o n t r o l_{i t} + δ_{i t} + ν_{i t} + ε_{i t} \end{array}$

In the formula, the subscript t denotes the year and the value range is 2012-2023, i denotes the A-share listed enterprises in Shanghai and Shenzhen, RDD_it denotes the enterprise innovation ability, GAP_it denotes the remuneration gap of returnee executives, and Control_it denotes the control variables. μ_it, β₁, β₂, β₃ denotes the constant term, the vector of coefficients corresponding to the explanatory variables, and the vector of coefficients corresponding to the control variables, respectively, γ₁ denotes the single threshold of the remuneration gap of returnee executives, δ_it denotes the individual fixed effect, ν_it denotes the time fixed effect, and ε_it denotes the random perturbation term obeying a normal distribution.

5

Empirical results

In recent years, with the continuous development of economy and society, coupled with a series of policies to attract overseas high-level talents as well as introduction programs issued by government departments, more and more overseas Chinese and foreign students choose to return to their home countries for development, which plays a quite important role in the development of science and technology and high-tech industry. For listed companies, the compensation and remuneration systems are always one of the most basic and extensive means of executive incentives. How to appropriately set the compensation standards for returnee executives is not only related to whether the company can attract truly capable returnee talents, but also an important guarantee for the improvement of corporate innovation ability. Based on Shanghai and Shenzhen A-share listed companies as an example, this chapter explores the specific impact of the remuneration gap of returnee executives on corporate innovation by using the threshold regression model, which provides support for enhancing corporate innovation ability and setting reasonable remuneration standards for returnee executives.

5.1

Descriptive statistics and correlation analysis

5.1.1

Descriptive statistics

The data collected from 950 listed companies are organized and input into STATA software for statistics, and the descriptive statistics of model variables are obtained as shown in Table 1. From the table, it can be seen that the mean value of the remuneration gap of returnee executives reaches 0.774, and the maximum value is 4.327, indicating that the ratio of the remuneration gap of returnee executives can reach 5.59 times, which reflects the obvious remuneration gap, and the returnee executives have more favorable compensation relative to ordinary employees. From the point of view of corporate innovation indicators, the mean value of corporate innovation capacity is 4.715%, and the standard deviation is 4.451, which shows that although the amount of innovation investment of listed companies is rising and growing fast, the overall proportion of R&D investment is still too small, and the strength of corporate innovation investment is still insufficient, and the gap is larger between different enterprises, which may be related to the heterogeneity of corporate executives, as well as the nature of the enterprises and the industries and regions in which they are located. This may be related to the heterogeneity of company executives, as well as the nature of enterprises and the industries and regions they are located in. The kurtosis and skewness of each variable range from -1.739 to -0.572, which is in line with normal distribution.

Table 1.

Descriptive statistical results of model variables

Variable	Means	SD	Min	Max	Skewness	Kurtosis
RDD	4.715	4.451	0.069	9.154	-1.322	-1.531
GAP	0.774	0.976	0.032	4.327	-1.739	-1.007
Lev	0.438	0.226	0.005	1.055	-0.685	-1.339
Roa	0.045	0.053	0.042	0.217	-1.724	-0.988
Growth	0.237	0.521	-0.174	1.389	-1.115	-1.559
Cash	0.042	0.079	-0.525	0.263	-0.881	-1.673
Own	4.281	4.157	-0.223	6.172	-1.638	-1.536
Power	0.306	0.465	0.795	0.786	-0.786	-1.231
SOE	0.263	0.442	0.006	0.498	-1.487	-1.401
Fixed	0.215	0.154	0.014	0.685	-1.176	-0.572
Indratio	0.376	0.052	0.323	0.574	-1.496	-0.945

Regarding the control variables, there are differences in gearing ratios among different companies, but most companies do not have high gearing ratios, and some companies with high gearing ratios may be due to the specificity of their industries. The majority of listed companies are making small profits, and there are significant differences in corporate performance among companies, with both profitable and loss-making companies. There are also relatively significant differences in growth, cash flow, share of fixed assets, and equity concentration across listed companies. In addition, the presence of independent directors on the board of directors can monitor and constrain the board’s decision-making, and when executives distort the incentive effect due to changes in the pay gap, the presence of independent directors can prevent the company from making wrong decisions.

5.1.2

Correlation analysis

In order to ensure the accuracy of the study, Pearson correlation analysis was firstly carried out on each variable to explore the relationship between the variables.Pearson correlation coefficient between 1 and -1 is used to measure the trend of the two sets of data.When the correlation coefficient is large, the probability of multicollinearity is large, then it is necessary to eliminate the variables that have serious multicollinearity, to ensure the reliability of the results of the study. In this paper, STATA software was used to analyze the correlation of the main variables, and the results are shown in Table 2, where *,**,*** indicate that they are significant at the 10%, 5%, and 1% levels, respectively, and the same as in the following.

Table 2.

Correlation analysis results of variables

-	RDD	GAP	Lev	Roa	Growth	Cash	Own	Power	SOE	Fixed	Indratio
RDD	1.000	-	-	-	-	-	-	-	-	-	-
GAP	0.024***	1.000	-	-	-	-	-	-	-	-	-
Lev	-0.006**	0.716***	1.000	-	-	-	-	-	-	-	-
Roa	0.107***	-0.085***	0.435***	1.000	-	-	-	-	-	-	-
Growth	0.043***	0.087***	0.335***	0.414***	1.000	-	-	-	-	-	-
Cash	0.324***	-0.014	0.067***	0.075***	0.465***	1.000	-	-	-	-	-
Own	0.215***	0.212***	0.225***	0.127***	0.451***	0.127***	1.000	-	-	-	-
Power	0.023	-0.064***	0.006	0.089***	0.026*	-0.031**	-0.016	1.000	-	-	-
SOE	0.047***	0.114***	0.131***	0.072***	0.147***	0.018	0.063***	0.073***	1.000	-	-
Fixed	0.031***	-0.028**	0.025*	0.075***	0.216***	0.098***	0.072***	-0.068***	-0.431***	1.000	-
Indratio	-0.085**	0.092***	0.292***	0.357***	0.439***	0.446***	0.452***	0.037***	0.127***	0.196***	1.000

From the table, it is concluded that the correlation coefficient between returnee executive pay gap (GAP) and enterprise innovation is 0.024 and significant at 1% level, indicating that there is a significant positive correlation between returnee executive pay gap and enterprise innovation capability. Regarding the correlation between control variables and corporate innovation capability, the gearing ratio (lev) is significantly and negatively correlated with corporate innovation capability at the 1% level, indicating that a high corporate gearing ratio reduces corporate innovation capability. Return on assets (Roa) is significantly and positively correlated with corporate innovation capability at the 1% level, indicating that the greater the return on assets of a company, the more favorable it is to enhance corporate innovation capability. The proportion of independent directors (Indratio) is significantly and negatively correlated with corporate innovation capability at the 5% level, indicating that a high proportion of independent directors is not conducive to the improvement of corporate innovation capability. Growth is significantly and positively correlated with corporate innovation ability at the 1% level, indicating that corporate innovation ability can be effectively improved with the increase of corporate growth indicators. The correlation coefficient between two powers (Power) and corporate performance is 0.023, but it doesn’t have any significance.

5.2

Analysis of the results of the threshold measurement model

5.2.1

Threshold effect test

In order to explore the nonlinear threshold effect between the remuneration gap of returnee executives and the innovation ability of enterprises, this paper selects the remuneration gap of returnee executives as the threshold variable affecting the innovation ability of enterprises, and then applies the threshold regression model constructed in the previous section to test the threshold characteristics between the remuneration gap of returnee executives and the innovation ability of enterprises. Bootstrap sampling is used to test the threshold regression model 500 times. Its test results are shown in Table 3, and Figure 1 shows the trend of the likelihood ratio of the threshold estimates, in which Figure 1(a)~(b) is a single threshold and a double threshold, respectively.

Table 3.

Threshold effect test and confidence interval

Test	Threshold variable-GAP
Test	Single threshold	Double threshold	Triple threshold
F value	158.42***	69.51***	53.85
P value	0.005	0.002	0.769
10%	11.594	10.423	88.474
5%	13.742	11.319	90.595
1%	19.957	18.741	135.839
Threshold value	2.463	4.134	9.236
95% CI	[2.414,2.491]	[4.095,4.159]	[8.315,9.547]

According to the results of the threshold effect test with overseas executive pay gap as the threshold variable and selecting enterprise innovation capability as the explanatory variable, overseas executive pay gap passes the double-threshold effect test at 1% significance level, and the two thresholds are 2.463 and 4.134, with corresponding 95% confidence intervals of [2.414,2.491] and [4.095,4.159], respectively. In addition, according to the trend plot of the likelihood ratio of the threshold feature with overseas executive pay gap as the threshold variable, it can be seen that the double threshold effect of overseas executive pay gap does exist. Taking the threshold estimate as the reference point, the impact of the overseas executive pay gap on the innovation capability of enterprises is divided, and the impact varies within different intervals of different overseas executive pay gaps.

5.2.2

Threshold regression results

Based on the results of the threshold effect test, the results of the double threshold regression with overseas executive pay gap as the core explanatory variable and overseas executive pay gap as the threshold variable are shown in Table 4. In different returnee executives pay gap intervals, the returnee executives pay gap has different impacts on the innovation ability of enterprises, showing obvious threshold characteristics, which are as follows: 1)

When the remuneration gap of returnee executives is ≤2.463, i.e., when the average remuneration of returnee executives of enterprises is lower than 2.463 times of the average remuneration of employees, the influence coefficient of returnee executives on the development of enterprise’s innovation ability is -0.148 at the 5% significance level, and the remuneration gap of returnee executives has a negative impact on the development of enterprise’s innovation ability.

2)

When the remuneration gap of returnee executives is in the interval of (2.463,4.134], i.e., when the average remuneration of returnee executives of enterprises is 2.463~4.134 times of the average remuneration of employees, the impact of the remuneration gap of returnee executives on the development of enterprises’ innovation ability turns positive, with the impact coefficient of 0.305, and passes the significance test at the level of 1%. This indicates that under the appropriate returnee executive pay gap, the positive enhancement effect of returnee executives on the development of enterprise innovation ability is obvious.

3)

When the remuneration gap of returnee executives is greater than 4.134, i.e., the average remuneration of returnee executives is 4.134 times higher than the average remuneration of employees, the coefficient of the influence of returnee executives on the development of enterprise innovation ability decreases to -0.161, which is significant at 1% level, indicating that the remuneration gap of returnee executives negatively affects the development of enterprise innovation ability in this interval.

Table 4.

Threshold effect estimation

Variable	Regression coefficient	Standard deviation	T value
Lev	-0.018***	0.004	-9.233
Roa	0.042***	0.001	8.064
Growth	0.051***	0.001	4.571
Cash	0.179***	0.003	6.226
Own	0.238***	0.002	3.285
Power	0.026	0.001	0.832
SOE	0.053***	0.000	4.463
Fixed	0.042***	0.000	5.108
Indratio	-0.057**	0.000	3.275
GAP≤2.463	-0.148**	0.002	9.327
2.463<GAP≤4.134	0.305***	0.001	9.503
GAP>4.134	-0.161***	0.000	9.519
(Con_)	-2.217***	0.004	-10.325
F statistic	72.816***
P value	0.000

Therefore, under the threshold effect of the remuneration gap of returnee executives, returnee executives exhibit a flat S-shaped curve influence relationship on the development of enterprise innovation ability. When the pay gap is in the interval of (2.463,4.134], i.e., when the average annual salary of the enterprise’s returnee executives is 2.463~4.134 times of the average annual salary of the employees, the role of returnee executives in promoting the development of the enterprise’s innovation capacity can be effectively played. The research hypothesis that fully incorporates the double threshold effect of returnee executives’ remuneration gap on enterprises’ innovation capacity is validated by the findings above.

5.3

Robustness and Heterogeneity Tests

5.3.1

Robustness Tests

In order to verify the robustness of the threshold regression results obtained in the previous section, this paper conducts the robustness test by replacing the core explanatory variables, lagging the core explanatory variables and adding control variables in three ways. Table 5 shows the results of the robustness test, in which model (1) is the regression result of replacing the core explanatory variables, models (2) to (3) are the regression results of lagging one period and two periods, respectively, and model (4) is the regression result of adding control variables. 1)

Replacing the core explanatory variable is replacing the overseas executive pay gap with overseas executive background experience (Oversea), and the dummy variable is defined as 1 when at least one member of the executive team has studied or worked outside of mainland China, and 0 otherwise.The regression coefficient of the background experience of returnee executives is -0.007 and passes the test of significance at the 5% level, which suggests that the background experience of returnee executives has a significant negative impact on the firm’s innovation ability has a significant negative effect.

2)

The impact of the remuneration gap of returnee executives on enterprise innovation may have a certain degree of continuity, i.e., the heterogeneous or complementary knowledge brought by returnee executives may not only affect the set of technological choices in the current R&D project of the enterprise, but also have an impact on the technological choices of the enterprise’s future R&D projects in the next phase or in the next few phases, and broaden the breadth of the knowledge of the enterprise’s innovation. At the same time, the enterprise innovation project itself is characterized by a long cycle, which means that it may take more than one year from the time when the returnee executives join the company to the time when they invest in R&D and apply for patents, which brings about a lag in the influence of returnee executives on the technological similarity of the enterprise. Therefore, this paper examines the influence of returnee executives on the enterprise’s technological development trajectory in the next one year and two years, and uses the first-order lag term (L1.GAP) and the second-order lag term (L2.GAP) of the returnee executives to regress respectively in the benchmark model. Comprehensively, both the first-order and second-order lag terms of the remuneration gap of returnee executives have obvious threshold effects on the innovation capacity of enterprises, and although there are differences in the threshold values, the positive and negative effects are consistent with the results of the threshold regression in the previous section.

3)

This paper adds the control variables of institutional investor shareholding (Instit), management shareholding (Man), and board size (Board) to the regression. Among them, the proportion of institutional investors is equal to the total number of shares held by institutional investors divided by the total number of shares of the company, management shareholding is equal to the total number of shares held by the executive team divided by the total number of shares of the company, and the size of the Board of Directors is the total number of board members. With the addition of control variables, the returnee executive pay gap has a significant positive effect on firms’ innovation capability within a reasonable pay gap interval, proving that the benchmark threshold regression results are robust.

Table 5.

The robustness testing regression results

Variable	Model (1)	Model (2)	Model (3)	Model (4)
GAP≤2.463	-	-	-	-0.148**(9.327)
2.463<GAP≤4.134	-	-	-	0.305***(9.503)
GAP>4.134	-	-	-	-0.161***(9.519)
Oversea	-0.007**(-1.792)	-	-	-
L1.GAP≤2.158	-	-0.137**(9.291)	-	-
2.158<L1.GAP≤4.027	-	0.292***(9.342)	-	-
L1.GAP>4.027	-	-0.145***(9.627)	-	-
L2.GAP≤2.349	-	-	-0.121**(8.045)	-
2.349<L2.GAP≤3.895	-	-	0.227***(8.397)	-
L3.GAP>3.895	-	-	-0.143***(8. 184)	-
Control	YES	YES	YES	YES
Instit	-	-	-	-0.005(-0.423)
Man	-	-	-	0.006(0.317)
Board	-	-	-	0.009***(3.574)
Cons_	-2.105***(-9.042)	-2.174***(-9.232)	-2.129***(-9.168)	-2.198***(-9.257)
Year	YES	YES	YES	YES
Ind	YES	YES	YES	YES
Adj.R²	0.087	0.091	0.086	0.086

5.3.2

Heterogeneity test

In order to further study the threshold effect of the returnee executives’ pay gap on the innovation ability of enterprises, this paper divides the enterprises into three types according to the degree of marketization: high, medium and low, and carries out the threshold test and the threshold regression respectively, and the results of the test and the regression are shown in Tables 6 and 7, respectively. It can be seen that at the 1% statistical level, the single and double thresholds of the threshold regression model of the returnee executive pay gap for enterprises with high, medium and low degrees of marketization are all significant, so this study adopts the double regression model to analyze the heterogeneity of the innovation ability of enterprises with high, medium and low degrees of marketization respectively. In the case of enterprises with a high degree of marketization, when the returnee executive pay gap is less than or equal to 0.224, its estimated coefficient is -0.131, which indicates that for every unit of its increase, the innovation capacity of the enterprise will be reduced by 0.131 units. When the remuneration gap of returnee executives is in the range of 0.224~0.385, the remuneration gap of returnee executives turns into a positive impact on the innovation ability of enterprises, and its regression coefficient is 0.184. When the remuneration gap of returnee executives is greater than 0.385, the impact of the remuneration gap of returnee executives on the innovation ability of enterprises is transformed into a negative impact at the level of 1 percent. For enterprises with medium and low degree of marketization, the development trend is consistent with that of enterprises with high degree of marketization, but the influence coefficient of enterprises with medium degree of marketization is relatively large, enterprises with low degree of marketization is second, and enterprises with high degree of marketization is relatively small, so there is heterogeneity in the influence of the remuneration gap of returnee executives on the enterprise’s innovation ability.

Table 6.

The heterogeneity threshold effect test

Marketization	Model	F value	P value	Threshold	95% CI
High	Single threshold	13.724	0.006**	0.385	[0.148,0.642]
	Double threshold	14.452	0.003***	0.224	[0.221,0.468]
	Double threshold	14.452	0.003***	0.385	[0.357,0.427]
Medium	Single threshold	25.147	0.001***	0.284	[0.201,0.636]
	Double threshold	94.301	0.000***	0.225	[0.215,0.233]
	Double threshold	94.301	0.000***	0.403	[0.395,0.421]
Low	Single threshold	78.725	0.002***	0.175	[0.133,0.205]
	Double threshold	68.316	0.001***	0.138	[0.142,0.358]
	Double threshold	68.316	0.001***	0.492	[0.479,0.527]

Table 7.

The heterogeneity threshold returns

Variable	High	Medium	Low
GAP-1	-0.131***(7.035)	-0.195***(6.493)	-0.152***(8.473)
GAP-2	0.184***(7.281)	0.294***(6.947)	0.265***(8.931)
GAP-3	-0.149***(7.126)	-0.207***(6.758)	-0.194***(8.692)
Control	YES	YES	YES
(Cons_)	-1.674***(-6.358)	-1.628***(-6.127)	-1.653***(-6.209)
Adj.R²	0.561	0.632	0.618

6

Conclusion

This paper takes the A-share listed companies in Shanghai and Shenzhen from 2012 to 2023 as the original sample, and selects 950 listed companies as the research sample to study the impact of the remuneration gap of returnee executives on the innovation ability of enterprises. The empirical results show that: 1)

There is a double-threshold effect of returnee executives’ pay gap on enterprise innovation capability, i.e., when the returnee executives’ pay gap is ≤2.463, the effect of returnee executives’ pay gap on enterprise innovation capability is significantly negative at the 5% level. When the remuneration gap of returnee executives is in the range of (2.463,4.134], there is a positive moderating effect of the remuneration gap of returnee executives on the innovation ability of enterprises at the 1% level. When the remuneration gap of returnee executives is greater than 4.134, it has a negative impact on corporate innovation capability at the 1% level.

2)

There is heterogeneity in the threshold effect of the remuneration gap of returnee executives on enterprises with different degrees of marketization, in which the threshold effect is larger for enterprises with medium degree of marketization and relatively smaller for enterprises with high degree of marketization.

Therefore, enterprises need to formulate a reasonable salary standard system when introducing returnee executives, which can not only motivate the executives to put forward effective corporate innovation strategies, but also eliminate the sense of anxiety of the employees, mobilize the enthusiasm of the employees, so that the enterprise value can be enhanced and the pay gap can better play the role of promoting corporate innovation.

Lingua:: Inglese

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A Study on the Impact of Remuneration Gap of Returnee Executives on Corporate Innovation in the Context of Digital Transformation

Yuan Wang

Pubblicato online: 21 mar 2025

Ricevuto: 11 nov 2024

Accettato: 15 feb 2025

DOI: https://doi.org/10.2478/amns-2025-0668

Parole chiaveReturnee executives, Pay gap, Threshold regression model, Double threshold, Enterprise innovation

© 2025 Yuan Wang, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Parole chiave
Returnee executives, Pay gap, Threshold regression model, Double threshold, Enterprise innovation