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This study examined whether a firm's business strategy influences the firm's compensation systems in high-technology firms. For the firm strategy variable, we used innovation strategy, which is one of the most critical business strategies in the high-technology industry. Our analysis showed that a firm's emphasis on innovation is positively related to the firm's employee pay level, both short-term pay and long-term pay. Moreover, a firm's emphasis on innovation has significant influence on several other aspects of employee compensation management. Innovation is positively associated with the difference in pay level between R&D employees and other employees, time orientation of employee compensation (the relative emphasis on long-term pay to short-term pay), and the length of the stock option vesting period. The influence of innovation is significant after controlling for industry membership.


Suggested Citation
Yanadori, Y. & Marler, J. H. (2003). Strategic compensation: does business strategy influence compensation in high-technology firms? (CAHRS Working Paper #03-03). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies.