Steered by digitization and incentives: The configuration and effect of improving innovation efficiency in manufacturing companies

Digitization has reshaped corporate innovation. However, few studies have explored how companies can fully incentivize their human capital in the digital transformation process to improve innovation capabilities. To address this gap, this study proposes a configurational framework that incorporates the degree of digitization and five key incentive mechanisms—namely, executive compensation incentives, executive equity incentives, employee compensation incentives, employee stock ownership plans, and pay gaps. Based on dynamic qualitative comparative analysis and regression analysis, this study utilized balanced data of 1387 listed manufacturing companies in China from 2016 to 2023 to explore the complex causal mechanisms driving high corporate innovation efficiency (IE). We found that no single factor constitutes a necessary condition for high corporate IE, but the necessity of executive and employee compensation incentives increased over time. Moreover, seven configuration paths leading to high corporate innovation efficiency were identified and integrated into four strategic solutions that vary across temporal dimensions, company size, and marginal effects. Our study demonstrates that the key to improving IE in the digital age lies in managing the relationship between digital value creation and human capital value distribution. The results provide important theoretical and practical insights into promoting high-quality innovation development in companies.