The impact of employee welfare on innovation performance: Evidence from China's manufacturing corporations

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 2010-2017, 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.