Analyzing the Impact of Executive Excess Compensation on Organizational Technological Innovation: Evidence from Bangladesh Pharmaceuticals & Chemicals Industry

Abstract

This study analysing the impact of executive excess compensation (EEC) that is influencing the quality and efficiency of Organizational Technological Innovation (OTI). Using the Agency Theory, the Resource-Based View (RBV) and Upper Echelons Theory perspective in this study, the study has identified the compatibility of Executive Excess Compensation (EEC) with Organizational Technological Innovation (OTI) and then it has focused on investigation of the relationship between Executive Excess Compensation (EEC) with Organizational Technological Innovation (OTI) and for this quantitative analysis has been done by the usage of a structural equation modelling (SEM) approach by the usage of SmartPLS software. The findings regarding the compatibility of EEC with OTI suggest even a strong alignment between the executive compensation levels and the organization’s innovation capabilities. This indicates that companies offering the executive excess compensation which tend to demonstrate greater innovation efforts that is potentially driven by incentives linked to the compensation structures. Further, the analysis has revealed that higher levels of EEC were consistently associated with the overall greater technological innovation efficiency and to the technological innovation quality which is indicating on a robust relationship between executive pay and innovation performance. The results of this study ultimately provide empirical support for the notion that executive compensation plays a crucial role in case of driving innovation initiatives within organizations which is particularly in the pharmaceutical and chemical sectors of Bangladesh. The findings of the study can give insights for researchers, industry practitioners, policymakers, investors and for academics. However, the study is with some limitation and by acknowledging that further research is definitely needed to explore on the potential areas of improvement on this untapped or unique field.