Against the backdrop of intensifying “involutionary” competition, some firms adopt excessive overtime to maintain short-term competitive advantages. This may weaken their long-term innovation capabilities by affecting labor efficiency and innovation resource allocation, thereby exacerbating the imbalance between innovation inputs and outputs. Therefore, a rigorous assessment of the mechanisms through which excessive overtime affects corporate innovation performance is of great significance for improving human resource allocation and promoting high-quality development driven by innovation in firms.

Taking China’s A-share listed companies from 2012 to 2023 as the research sample, this paper constructs a firm-level index of excessive overtime by combining satellite nighttime light data, comprehensively measures corporate innovation performance from three dimensions, and systematically examines the impact of excessive overtime on corporate innovation performance. Empirical results show that excessive overtime significantly depresses corporate innovation performance. Mechanism testing indicates that excessive overtime undermines corporate innovation performance by reducing the share of labor income and accelerating the outflow of high-skilled talents. Heterogeneity analysis reveals that the negative effect is more pronounced in technology-intensive firms, competitive industries, and cities with a lower level of marketization. In addition, strengthening equity-based incentives and establishing grassroots unions with labor dispute mediation committees can effectively mitigate the negative impact of excessive overtime on corporate innovation performance.

This paper makes the following contributions: In the context of “involutionary” competition, it deepens our understanding of the microeconomic mechanisms underlying such competition, systematically incorporates excessive overtime into an analytical framework of corporate innovation performance, and enriches the literature on corporate innovation behavior. By considering heterogeneity in firm, industry, and urban economic development, it examines the heterogeneous effects of excessive overtime on corporate innovation performance and explores governance measures from the perspectives of equity incentives and employee rights protection. The findings provide empirical evidence and policy references for addressing “involutionary” competition and promoting firms’ transition toward innovation-driven development.