This study examined whether a firm\u27s business strategy influences the firm\u27s compensation systems in high-technology firms. For the firm strategy variable, we used innovation strategy, which is one of the most critical business strategies in the high-technology industry. Our analysis showed that a firm\u27s emphasis on innovation is positively related to the firm\u27s employee pay level, both short-term pay and long-term pay. Moreover, a firm\u27s emphasis on innovation has significant influence on several other aspects of employee compensation management. Innovation is positively associated with the difference in pay level between R&D employees and other employees, time orientation of employee compensation (the relative emphasis on long-term pay to short-term pay), and the length of the stock option vesting period. The influence of innovation is significant after controlling for industry membership
