Executives' Excess Compensation and Green Innovation Performance: An Attention‐Based Theory Perspective

ABSTRACT Research Question/Issue Grounded in attention‐based theory, this study examines the impact of executive excess compensation (EEC) on green innovation performance, while also analyzing how contextual factors at the individual (executives' tenure, performance‐induced executives' turnover), organizational (performance shortfalls, ownership), and environmental (environmental regulation, media focus) levels shape this relationship. Research Findings/Insights EEC fosters executives' long‐term orientation, which in turn directs their attention toward green innovation and ultimately enhances green innovation performance. This effect is particularly pronounced in firms characterized by long executive tenure, low performance‐induced turnover, minimal performance shortfalls, stringent environmental regulations, and intense media scrutiny; it is further exacerbated in family firms and state‐owned enterprises where executives possess strong incentives for political promotion. Furthermore, additional analysis indicates that EEC also enhances green innovation quality. Theoretical/Academic Implications We help address inconsistencies in previous research on compensation incentives and corporate environmental governance by distinguishing EEC from other types of pay incentives. Based on attention‐based theory, we argue that the weak connection between EEC and short‐term financial performance motivates executives to adopt a long‐term perspective and place greater emphasis on green innovation, thus enhancing both the quantity and quality of green innovation. Practitioner/Policy Implications These findings offer crucial policy implications for emerging economies confronting challenges in the effective incentivization of green innovation. By demonstrating that EEC motivates executives to prioritize environmental governance, we highlight a pathway for firms to secure a competitive advantage within the contemporary ESG‐centric landscape.