Abstract:

Effects of firm pay level, vertical pay dispersion and horizontal pay dispersion on firm innovation, performance and turnover were examined in an SEM-based meta-analysis of 254 effect sizes from 113 empirical studies of 438880 western and eastern companies. Results showed that pay level could not only increase firm innovation and performance, but also decrease firm turnover level. Although the effects of vertical and horizontal pay dispersion on firm performance were not significant, they could decrease firm innovation and increase turnover level. Further moderation analyses showed that the relation between pay level and firm performance was moderated by nation. Compared to American firms, pay level in Chinese firms was more positively associated with firm performance. Our conclusion has important implications to firm compensation management.

Key words: pay level, pay dispersion, innovation, performance, turnover