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

72 Pages Posted: 26 Oct 2021 Last revised: 17 Jul 2023

See all articles by Bo Bian

Bo Bian

University of British Columbia

Jean-Marie Meier

The Wharton School, University of Pennsylvania; University of Texas at Dallas - Naveen Jindal School of Management

Date Written: October 1, 2020

Abstract

China’s quid-pro-quo policy requires foreign multinationals to trade off the short-term benefits of market access and the long-term costs of technology transfer. Do Western CEO incentives affect this trade-off? We document that firms managed by CEOs with high-powered incentive contracts form more partnerships with China and transfer more technology there. These firms subsequently lose R&D human capital to China and face more patenting competition from China, suggesting negative long-term consequences. We provide evidence consistent with the myopia-inducing property of high-powered CEO incentives. The paper highlights an important real effect of CEO incentives and 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). Proceedings of Paris December 2021 Finance Meeting EUROFIDAI - ESSEC, 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

The Wharton School, University of Pennsylvania ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

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

University of Texas at Dallas - Naveen Jindal School of Management ( 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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