Cheng, RFrijns, BKim, HRyu, D2026-02-112026-02-112024-03-01Economic Systems, ISSN: 0939-3625 (Print), Elsevier BV, 48(1), 101171-101171. doi: 10.1016/j.ecosys.2023.1011710939-3625http://hdl.handle.net/10292/20623This study examines the effect of option incentives on corporate innovation in a representative emerging and transitioning economy. Using data from China, we show that option incentives have significant positive impacts on two crucial aspects of innovation: inputs and outputs. Innovation efficiency consistently improves after the introduction of option incentives. These positive effects remain when we control for potential endogeneity using difference-in-differences estimation with propensity score matching. Option incentives have more pronounced effects in high-tech firms than in other firms. Our findings suggest that firms’ specific characteristics and needs should be considered when developing incentive policies.This is the Author's Accepted Manuscript version of an article published in Economic Systems © 2023 Elsevier B.V. The Version of Record is available at DOI: 10.1016/j.ecosys.2023.1011713501 Accounting, Auditing and Accountability3502 Banking, Finance and Investment35 Commerce, Management, Tourism and Services3507 Strategy, Management and Organisational Behaviour9 Industry, Innovation and Infrastructure1402 Applied Economics1403 Econometrics1503 Business and ManagementEconomics3502 Banking, finance and investment3801 Applied economicsJournal ArticleOpenAccess10.1016/j.ecosys.2023.101171