Impact of CEO stock options on corporate innovation: evidence from U.S. public firms
Research Article
Open Access
CC BY

Impact of CEO stock options on corporate innovation: evidence from U.S. public firms

Yin Hao 1*
1 School of Economics, Central University of Finance and Economics, Beijing 100081, China
*Corresponding author: 310667732@qq.com
Published on 12 August 2025
Journal Cover
JAEPS Vol.18 Issue 7
ISSN (Print): 2977-571X
ISSN (Online): 2977-5701
Download Cover

Abstract

In the context of an increasingly complex competitive landscape, the enhancement of innovation capabilities through the implementation of effective incentive mechanisms has emerged as a pivotal concern for enterprises. This study utilizes a sample of U.S. publicly listed companies from 1992 to 2021 to empirically investigate the influence of Chief Executive Officer (CEO) option incentives on corporate innovation capacity. The findings reveal that an increased proportion of CEO option compensation relative to total compensation significantly correlates with a rise in the number of patent applications filed by firms, thereby indicating that option incentives can effectively stimulate corporate innovation. Moreover, the impact of option incentives demonstrates heterogeneity. In growth-stage enterprises, characterized by high sales growth rates, option incentives exhibit a more pronounced facilitative effect on innovation. This observation aligns with the resource constraints, elevated growth expectations, and strategic imperatives inherent to growth-stage firms. Additionally, firms led by male CEOs experience a stronger innovation-promoting effect from option incentives, which is consistent with the generally higher risk-taking propensity observed among male executives. The risk compensation mechanism inherent in option incentives is more efficacious in amplifying the innovation drive of such managers. This study provides empirical evidence that can inform the design of effective incentive mechanisms, thereby assisting enterprises in optimizing incentive strategies, enhancing innovation capabilities, and sustaining competitive advantages across varying developmental stages and managerial backgrounds in a dynamic market environment.

Keywords:

stock option, incentive, corporate innovation, poisson regression

View PDF
Hao,Y. (2025). Impact of CEO stock options on corporate innovation: evidence from U.S. public firms. Journal of Applied Economics and Policy Studies,18(7),67-76.

References

[1]. Adewumi, A., Ewim, S. E., Sam-Bulya, N. J., & Ajani, O. B. (2024). Strategic innovation in business models: Leveraging emerging technologies to gain a competitive advantage.Cogent Education, 6(10), 3372-3398.

[2]. Tian, X., & Wu, L. (2025). How Does CEO Cognitive Style and Board Characteristics Impact Strategic Risk‐Taking? Corporate Governance An International Review.

[3]. Papageorgiadis, N., Procopiou, A., & Sofka, W. (2023). Unintended consequences of outcome based compensation – How CEO bonuses, stocks and stock options affect their firms’ patent litigation.Research Policy, 52(8), 104816.

[4]. Melis, A., & Nawaz, T. (2024). The Impact of CEOs’ Personal Traits on Organisational Performance: Evidence from Faith-Based Charity Organisations.Journal of Business Ethics, 190, 919–939.

[5]. Jin, C., & Li, D. (2023). Study on the impact of R&D input intensity on technological innovation output ‐ Based on data from China’s high technology industry.PLOS One, 8(10), e0292851.

[6]. Loukil, N., & Yousfi, O. (2022). Do CEO’s attributes increase risk-taking? Empirical evidence from France.Asia-Pacific Journal of Business Administration, 15(5), 721-745.

[7]. Benischke, M. H., Martin, G. P., & Glaser, L. (2018). CEO equity risk bearing and strategic risk taking: The moderating effect of CEO personality.Strategic Management Journal, 40, 153-177.

[8]. Dissanayake, S., Weerasinghe, A., & Dissanayake, D. (2025). Engineer CEOs and corporate risk taking.Journal of Accounting Literature, 47(5), 249-269.

[9]. Martino, P., Rigolini, A., & D’Onza, G. (2018). The relationships between CEO characteristics and strategic risk-taking in family firms.Journal of Risk Research, 23(1), 95-116.

[10]. Lin, K. J., Karim, K., Hu, R., & Dunn, S. (2022). Fifty shades of CEO duality: CEO personal risk preference, duality and corporate risk-taking.Journal of Applied Accounting Research, 24(3), 425-441.

[11]. Pan, X., & Xu, L. (2024). Factors Influencing Corporate Innovation: A Literature Review.Journal of Economics, Business and Management, 12(2), 214-218.

[12]. Yen, T. H., Minh, C. T., Diep, N. N., & Long, K. D. (2025). The impact of individual and organizational factors on employee innovative work behavior: Empirical evidence from private companies in Vietnam.Problems and Perspectives in Management, (1), 193-208.

[13]. Makanyeza, C., Mabenge, B. K., & Ngorora-Madzimure, G. P. K. (2022). Factors influencing small and medium enterprises’ innovativeness: Evidence from manufacturing companies in Harare, Zimbabwe.Global Business and Organizational Excellence, 42(3), 10-23.

[14]. Yang, X., Li, F., & Liu, Y. (2024). Industry and Regional Peer Effects on Company Innovation: An Empirical Study from Listed Companies in China.Finance Research Letters, 67, 105719.

[15]. Kwaśniewski, J. P. (2025). Factors Influencing Innovative Activities in Selected Enterprises.American Journal of Management, 25(1).

[16]. Chen, C. X., Kim, M., Li, L. Y., & Zhu, W. (2021). Accounting Performance Goals in CEO Compensation Contracts and Corporate Risk Taking.Management Science, 68(8), 6039-6058.

[17]. Zandi, G., Mohamad, S., Keong, O. C., & Ehsanullah, S. (2019). CEO Compensation and Firm Performance.International Journal of Innovation, Creativity and Change, 7(7), 316-334.

[18]. Pan, J., Lin, G., & Xiao, W. (2022). The Heterogeneity of Innovation, Government R&D Support and Enterprise Innovation Performance.Research in International Business and Finance, 62, 101741.

[19]. Mei, L., Hu, T., Mao, Z., & Wang, Z. (2023). Equity Incentive Characteristics, Industry Life Cycle and Corporate Innovation.Finance Research Letters, 58, 104556.

[20]. US Data Corporation. (2022). SIC Code Manual. Retrieved from https: //www.usdatacorporation.com/wp-content/uploads/2022/02/US-DATA-CORPORATION-SIC-CODE-BINDER-1.pdf.

References

[1]. Adewumi, A., Ewim, S. E., Sam-Bulya, N. J., & Ajani, O. B. (2024). Strategic innovation in business models: Leveraging emerging technologies to gain a competitive advantage.Cogent Education, 6(10), 3372-3398.

[2]. Tian, X., & Wu, L. (2025). How Does CEO Cognitive Style and Board Characteristics Impact Strategic Risk‐Taking? Corporate Governance An International Review.

[3]. Papageorgiadis, N., Procopiou, A., & Sofka, W. (2023). Unintended consequences of outcome based compensation – How CEO bonuses, stocks and stock options affect their firms’ patent litigation.Research Policy, 52(8), 104816.

[4]. Melis, A., & Nawaz, T. (2024). The Impact of CEOs’ Personal Traits on Organisational Performance: Evidence from Faith-Based Charity Organisations.Journal of Business Ethics, 190, 919–939.

[5]. Jin, C., & Li, D. (2023). Study on the impact of R&D input intensity on technological innovation output ‐ Based on data from China’s high technology industry.PLOS One, 8(10), e0292851.

[6]. Loukil, N., & Yousfi, O. (2022). Do CEO’s attributes increase risk-taking? Empirical evidence from France.Asia-Pacific Journal of Business Administration, 15(5), 721-745.

[7]. Benischke, M. H., Martin, G. P., & Glaser, L. (2018). CEO equity risk bearing and strategic risk taking: The moderating effect of CEO personality.Strategic Management Journal, 40, 153-177.

[8]. Dissanayake, S., Weerasinghe, A., & Dissanayake, D. (2025). Engineer CEOs and corporate risk taking.Journal of Accounting Literature, 47(5), 249-269.

[9]. Martino, P., Rigolini, A., & D’Onza, G. (2018). The relationships between CEO characteristics and strategic risk-taking in family firms.Journal of Risk Research, 23(1), 95-116.

[10]. Lin, K. J., Karim, K., Hu, R., & Dunn, S. (2022). Fifty shades of CEO duality: CEO personal risk preference, duality and corporate risk-taking.Journal of Applied Accounting Research, 24(3), 425-441.

[11]. Pan, X., & Xu, L. (2024). Factors Influencing Corporate Innovation: A Literature Review.Journal of Economics, Business and Management, 12(2), 214-218.

[12]. Yen, T. H., Minh, C. T., Diep, N. N., & Long, K. D. (2025). The impact of individual and organizational factors on employee innovative work behavior: Empirical evidence from private companies in Vietnam.Problems and Perspectives in Management, (1), 193-208.

[13]. Makanyeza, C., Mabenge, B. K., & Ngorora-Madzimure, G. P. K. (2022). Factors influencing small and medium enterprises’ innovativeness: Evidence from manufacturing companies in Harare, Zimbabwe.Global Business and Organizational Excellence, 42(3), 10-23.

[14]. Yang, X., Li, F., & Liu, Y. (2024). Industry and Regional Peer Effects on Company Innovation: An Empirical Study from Listed Companies in China.Finance Research Letters, 67, 105719.

[15]. Kwaśniewski, J. P. (2025). Factors Influencing Innovative Activities in Selected Enterprises.American Journal of Management, 25(1).

[16]. Chen, C. X., Kim, M., Li, L. Y., & Zhu, W. (2021). Accounting Performance Goals in CEO Compensation Contracts and Corporate Risk Taking.Management Science, 68(8), 6039-6058.

[17]. Zandi, G., Mohamad, S., Keong, O. C., & Ehsanullah, S. (2019). CEO Compensation and Firm Performance.International Journal of Innovation, Creativity and Change, 7(7), 316-334.

[18]. Pan, J., Lin, G., & Xiao, W. (2022). The Heterogeneity of Innovation, Government R&D Support and Enterprise Innovation Performance.Research in International Business and Finance, 62, 101741.

[19]. Mei, L., Hu, T., Mao, Z., & Wang, Z. (2023). Equity Incentive Characteristics, Industry Life Cycle and Corporate Innovation.Finance Research Letters, 58, 104556.

[20]. US Data Corporation. (2022). SIC Code Manual. Retrieved from https: //www.usdatacorporation.com/wp-content/uploads/2022/02/US-DATA-CORPORATION-SIC-CODE-BINDER-1.pdf.

Cite this article

Hao,Y. (2025). Impact of CEO stock options on corporate innovation: evidence from U.S. public firms. Journal of Applied Economics and Policy Studies,18(7),67-76.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Journal: Journal of Applied Economics and Policy Studies

Volume number: Vol.18
Issue number: Issue 7
ISSN: 2977-5701(Print) / 2977-571X(Online)

© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open access policy for details).

For authors
For editors
For reviewers

Cookies are used by this site.
Copyright © 2024 EWA Publishing, its licensors, and contributors. All rights reserved, including text and data mining, AI training, and similar technologies.