The relationship between innovativeness and pay-performance sensitivity is theoretically ambiguous because innovative activities simultaneously enhance the productivity of executives in creating shareholder value (productivity effect) and increase the volatility of the firm's performance...

This paper asks whether adversity spurs the introduction of process innovations and increases the use of managerial incentives by firms. Using a large panel data set of workplaces in Canada, our identification strategy relies on exogenous variation in adversity arising from increased border...