This study investigates how the pay gap between executives and employees influences corporate research and development (R&D) efficiency. Moving beyond a traditional focus solely on the size of this gap, the research examines how its formation and perceived legitimacy affect R&D efficiency. Drawing on Rouen (2020), this study decomposes the pay gap into economically explained and unexplained components. Analyzing panel data from Korean listed firms from 2013 to 2022, the study assesses the impact of these components on R&D efficiency, as measured by the research quotient (RQ). The results indicate that the economically explained pay gap is positively associated with R&D efficiency, whereas the economically unexplained pay gap has a significant negative impact. This detrimental effect of the unexplained pay gap is especially pronounced when executives are overpaid and employees are underpaid. These findings suggest that not all pay gaps are detrimental; their effects depend on whether the gap is perceived as legitimate. By incorporating the perspective of pay inequality versus pay inequity into the innovation context, this study offers new empirical insights into compensation structure and its role in fostering efficient innovation investments.