How to use the pay contract to encourage executives to implement innovation activities has become an important issue to be solved by the theoretical and practical circles. Based on the data of Shanghai and Shenzhen A-share listed companies from 2006 to 2015, this paper examines the impact of external compensation gap on corporate innovation, and further discusses the contextual effects of executive talent and property rights. The study finds that the external compensation gap of executives has a positive effect on enterprise innovation. Moreover, the higher talent executives possess, the more obvious the external compensation gap will promote the innovation of enterprises. In addition, compared with state-owned enterprises, the external compensation gap of non-state-owned enterprise executives has a more significant effect on corporate innovation. This paper not only expands the economic consequences of the external compensation gap, but also provides inspiration for companies to adjust the compensation structure and encourage executives to promote enterprise innovation.
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