Employee Overtime and Innovation Dilemma

Abstract

We examine the influence of human resource (HR) slack, specifically that accrued through employee overtime, on firm innovation in China. Leveraging textual analysis to gauge overtime levels, our findings reveal that although overtime increases innovation output, it does not enhance its quality. These results remain consistent even in firms with research and development personnel slack or those offering higher salaries. Additionally, no significant differences are observed between state-owned and non-state-owned firms in terms of overtime’s impact on innovation. Furthermore, the effect of employee overtime on innovation output is less pronounced in the manufacturing and labor-intensive industries. Our study suggests that governmental leniency towards corporate infringement of employee rights does not sufficiently boost firm competitiveness. This research contributes to the understanding of the economic implications of widespread employee overtime in emerging economies, offering valuable business ethics and policy insights for managers and regulators addressing the fundamental working hour practices.