A large amount of literature has addressed the significant effects of some internal and external factors on corporate innovation performance. However, no research in the field of production economics focuses on the plausible impact of employee welfare on innovation performance of manufacturing corporations. Using a large sample data from Chinese listed manufacturing corporations over the period of 2010–۲۰۱۷, this study investigates whether and how employee welfare affects corporate innovation performance. We find that manufacturing corporations with higher employee welfare have better innovation performances measured by three categories of patent applications and this positive relationship is mainly reflected in the level of quality of innovation but not in the quantity of it. Then, various robustness checks further show that our results are not biased by alternative measures of innovation performance or employee welfare through different regression methods. In addition, the channel tests show that the positive impacts of employee welfare on innovation performances in China’s manufacturing corporations are mainly achieved by retaining outstanding employees, attracting positive media reports and increasing inventor (R&D) efficiency. Finally, we test the validity of three impact channels by using mediating effect analysis and further confirm our conclusions.

Introduction

Innovation performance and its influence factors in manufacturing corporations are very important issues in the field of production economics (Zeng et al., 2017; Escrig-Tena et al., 2018). As the “engine of driving revenue growth” (Patterson, 1998) and “the cornerstone of organizational survival” (Hurley and Hult, 1998), innovation is also a hot practical topic for policy makers and corporation managers. For the reason that manufacturing corporations are the core and main body of the national innovation system, it is extremely important to promote innovation performance in manufacturing corporations to achieve and maintain significant economic growth and development. Many external and internal factors that can affect corporate innovation have discussed in recent researches. For example, on the one hand, analyst pressure (Guo et al., 2019), national policies (Gu and Zhang, 2017), competitive environment (Aghion and Howitt, 2005; Lunn, 1986), litigation risk (Yue et al., 2015) are well recognized external factors related to corporate innovation performance. On the other hand, corporate size (Scherer, 1965), equity incentives (Chang et al., 2015), internal pay dispersion (Ederer and Manso, 2013), and management characteristics (Song et al., 2010), are also taken as important internal drivers for innovation performance. Specifically, in the field of production economics, the effects of hard and soft quality management (SQM and HQM) as well as human capital development on innovation performance are well addressed in recent years (see Zeng et al., 2017; Escrig-Tena et al., 2018; Hong et al., 2019; Ma et al., 2019 and among others).