As China’s market economy continues to expand, the corporate governance system is becoming increasingly perfect. A reasonable pay gap among executives can effectively motivate managers. Compared with remuneration level , the “pay gap”, which describes the
degree of difference in the remuneration of members of an enterprise, has a more widespread and far-reaching impact on the attitude and behavior of remuneration recipients and the performance of an organization at all levels. The narrowing of the pay gap among
executives may give a sense of fairness to low-paid executives, but it weakens the incentive effect to high-paid executives. Those with high remuneration usually have higher power and status in a company, and whether the remuneration design can incentivize them is
crucial to the development of the company. Therefore, the impact of a large pay gap on the psychology and behavior of higher remuneration recipients is a problem that should not be ignored. At present, there are relatively few studies on the relationship between pay gap among executives and corporate innovation, which are mainly based on tournament theory and behavioral theory, and no unanimous conclusion has been made. However, according to the two theories, analysis is mainly conducted from the perspective of low-paid executives, instead of the impact of the pay gap on the psychology and behavior of high-paid
executives. Such ignorance is likely to be an important reason for the inconsistency of empirical findings. Therefore, this paper investigates the impact of the pay gap on corporate innovation input from the perspective of high-paid executives, and conducts a theoretical analysis and empirical test on the action mechanism of the pay gap.

With China’s listed companies as research objects, this paper deeply studies the impact of internal and external pay gaps among executives on corporate innovation input, aiming to explore the mechanism of action of the pay gap among executives on corporate
innovation from the perspective of high-paid executives based on the downward comparison in social comparison theory. At the same time, by examining the moderating effects of CEO age, CEO shareholding gap, enterprise age and environmental uncertainty,
this paper further verifies the mechanism of action of the main effect and clarifies the boundary conditions for pay gap to affect corporate innovation. The results show that both internal and external pay gaps among CEOs can arouse stronger self-actualization
motivation of CEOs through social comparison, which has a positive impact on corporate innovation input. CEOs who are old or work in a long-established enterprise usually have a high status and reputation, and the pay gap gives a weak incentive to their achievement
motivation, which weakens the positive impact of the pay gap on corporate innovation input. In contrast, when environmental uncertainty is high, it is more difficult for CEOs to make decisions. The success of innovation will create a higher degree of satisfaction for CEOs on their achievement motivation, which will enhance the positive impact of the pay gap on corporate innovation corporate. Finally, robustness testing is carried out by replacing explanatory variables and explained variables, adding control variables, handling extreme values, changing the regression model and instrumental variables method, and the final analysis results are consistent with what mentioned above in this paper.

Theoretically, this study provides a new theoretical perspective to analyze the impact of the internal and external pay gaps on corporate innovation input. Focusing on the psychological and behavioral changes of CEOs and turning attention from low-paid
executives to high-paid ones, this paper is a supplement to relevant literature limited to tournament theory and behavioral theory, and enriches the theoretical perspective of research on the pay gap among executives. Moreover, this paper incorporates both internal
and external pay gaps into the research framework, and considers the objects with whom CEOs are compared in social comparison in a more comprehensive way. In addition, this paper examines the moderating effects of CEO age, CEO shareholding gap, enterprise age
and environmental uncertainty, and defines some of the boundary conditions for the CEO’s internal and external pay gaps to affect investment in corporate innovation. From a practical perspective, although the widening of the pay gap may cause dissatisfaction among low-remuneration recipients and discourage cooperation and communication among an enterprise’s staff members, it can inspire the self-confidence and achievement motivation of high-remuneration recipients, which will have a positive effect on the enterprise’s innovation behavior. However, motivated by a high pay gap, CEOs tend to increase investment in corporate innovation in order to satisfy their own achievement motivation, but this may not meet the needs of corporate development. So, companies need to design effective governance mechanisms and incentive systems to alleviate possible agency problems. In addition, for older CEOs and CEOs of long-established companies, the pay gap has limited incentive effects on their achievement motivation, so the remuneration
incentive policy makers should adjust the incentive policy according to different situations.