TY - JOUR AU - Lee, Joonkyum AB - PurposeThe purpose of this paper is to investigate the contrasting moderating effect of a firm’s exploration on the relationship between the two types of long-term incentives (stock options/stock ownership) for the chief executive officers and a firm’s long-term performance. Even though the two types of incentives are designed to improve long-term performance, the degrees of impact on long-term performance differ. Based on behavioral agency theory, this study theoretically and empirically examines the role of a firm’s exploration on the above relationship.Design/methodology/approachThis study used three archival sources to obtain data on stock options, stock ownership, patents and exploration, financial measures, and others. Based on a sample of 1,963 firms in various industries from 1995 to 2006, this study tested the moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s performance.FindingsThis study reveals the contrasting moderating effect of a firm’s exploration on the relationship between stock options/ownership and a firm’s long-term performance: a positive moderating effect on the relationship between stock options and performance and a negative moderating effect on the relationship between stock ownership and performance. In addition, empirical evidence was added on the inverted U-shaped relationship between stock ownership and a firm’s long-term performance.Originality/valueThere is little research on a firm’s internal characteristics that strengthen or weaken the effects of stock options and stock ownership on firm performance. This study demonstrates the differential moderating effects of exploration on the relationship between stock options/stock ownership and long-term performance. Such effects of exploration come from the different risk features of stock options and stock ownership. The key implication is that stock options could be more effective than stock ownership to enhance a firm’s long-term performance when a firm has a strong exploration orientation. TI - The contrasting moderating effect of exploration on the relationship between stock options/stock ownership and a firm’s long-term performance JF - Management Decision DO - 10.1108/MD-07-2017-0645 DA - 2018-09-10 UR - https://www.deepdyve.com/lp/emerald-publishing/the-contrasting-moderating-effect-of-exploration-on-the-relationship-trKBVbn0IS SP - 1956 EP - 1968 VL - 56 IS - 9 DP - DeepDyve ER -