Does matching pay policy with innovation strategy really improve firm performance? : An examination of technology‐based service firms

Purpose – The purpose of this paper is to examine whether matching pay policy with innovation strategy really improves firm performance. Design/methodology/approach – Three technology‐based service sectors (software, information system integration, and IC design) comprise the analytical samples. A hierarchical multiple regression method is adopted to examine the research hypotheses. Findings – Examinations reveal that the positive effect which pay policy combined with innovation strategy has on firm performance is only found in IC design service firms. Research limitations/implications – Industry serves as a moderator in the relationship between the match and firm performance. However, this examination concentrates on the technology‐based service sectors only. Practical implications – Matching pay policy and innovation strategy cannot be regarded as a panacea for improving firm performance. Originality/value – This study makes an interesting contribution to understanding the strategic perspective of compensation.