Title: “Did Western CEO Incentives Contribute to China’s Technological Rise?”
We study the role of Western CEO incentives in fostering the technological rise of China. Due to China’s quid pro quo policy, foreign multinationals face a trade-off between the short-term benefits of accessing China’s vast market and the long-term costs of transferring technology to China. Leveraging microdata on the global patent network, we construct multiple measures to describe technological interactions between US firms and over 70 countries. We find that firms managed by CEOs with high-powered incentive contracts form more partnerships with China and transfer more technology to China. These firms subsequently lose R&D human capital to China and face more patenting competition from China, suggesting negative long-term consequences in innovation. We provide evidence consistent with the myopia-inducing instead of the effort-inducing property of high-powered CEO incentives. The paper reveals an important real effect of CEO incentives and highlights a novel channel behind China’s technological catch-up. Our findings have wide policy implications, informing both the future design of CEO compensation packages and the regulatory architecture concerning technological interactions with China.
Presenter: Bo Bian (University of British Columbia)
Coauthors: Jean-Marie Meier (University of Texas at Dallas)
Discussant: Moqi Groen-Xu (Queen Mary University of London)