Equity Incentives and R&D Investment: A Contract Model

We analyze the relationship between equity incentives and R & D investment and establish a simple contract principal-agent model including equity incentives and R&D expenditures, and obtain the optimal solution the proportion of equity incentives and optimal combination of R & D investment. Though studying the relationship between executive equity incentive and R&D investment is of great strategic significance not only for further improving and implementing of equity incentive system but also for promoting of business R&D investment and enhancing the innovation capability of enterprises.