Exploration or exploitation? A study on equity incentive design, dynamic decision making, and economic consequences.

We examine whether equity incentive can encourage exploratory innovation from the perspective of dynamic innovation decision-making process. Using the data of equity incentives in China's listed companies from 2006 to 2017, we construct exploratory intensity of innovation strategy and analyze the impact of equity incentive on corporation exploratory innovation strategy from both the cross-sectional and time-series perspectives. We find a positive relationship between the vesting period and explorative innovation strategy in the cross-sectional dimension.