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<p>This study examines the relationship between executive-employee pay gap (EEPG) and technological innovation using data from firms listed on the Korea Stock Exchange from 2013 to 2022. The baseline result indicates a significant negative relationship between EEPG and technological innovation. Additionally, EEPG is decomposed into explained and unexplained components. The results reveal a clear asymmetry: explained EEPG is positively associated with technological innovation, whereas unexplained EEPG has a negative impact. These results are robust across various model specifications, including Poisson and negative binomial regressions, and subsample tests. Additional tests reinforce the main findings. Using an alternative decomposition method, the residual component of EEPG continues to exhibit a negative impact. Further analysis reveals that this adverse effect is particularly pronounced in compensation structures where executives are overpaid and employees are underpaid, or vice versa. In summary, the EEPG’s economic justifiability is more crucial for technological innovation.</p>

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When does the executive-employee pay gap hinder technological innovation? Evidence from South Korea

  • 期刊论文

  • 发表日期：

    2026年6月2日

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  • Jeongdae Yim

摘要

This study examines the relationship between executive-employee pay gap (EEPG) and technological innovation using data from firms listed on the Korea Stock Exchange from 2013 to 2022. The baseline result indicates a significant negative relationship between EEPG and technological innovation. Additionally, EEPG is decomposed into explained and unexplained components. The results reveal a clear asymmetry: explained EEPG is positively associated with technological innovation, whereas unexplained EEPG has a negative impact. These results are robust across various model specifications, including Poisson and negative binomial regressions, and subsample tests. Additional tests reinforce the main findings. Using an alternative decomposition method, the residual component of EEPG continues to exhibit a negative impact. Further analysis reveals that this adverse effect is particularly pronounced in compensation structures where executives are overpaid and employees are underpaid, or vice versa. In summary, the EEPG’s economic justifiability is more crucial for technological innovation.