Does matching pay policy with innovation strategy really improve firm performance?

Abstract

Purpose The purpose of this paper is to examine whether matching pay policy with innovation strategy really improves firm performance. Design/methodology/approach Three technology‐based service sectors (software, information system integration, and IC design) comprise the analytical samples. A hierarchical multiple regression method is adopted to examine the research hypotheses. Findings Examinations reveal that the positive effect which pay policy combined with innovation strategy has on firm performance is only found in IC design service firms. Research limitations/implications Industry serves as a moderator in the relationship between the match and firm performance. However, this examination concentrates on the technology‐based service sectors only. Practical implications Matching pay policy and innovation strategy cannot be regarded as a panacea for improving firm performance. Originality/value This study makes an interesting contribution to understanding the strategic perspective of compensation.