A multilevel contingency model of employee ownership and firm productivity: The moderating roles of industry growth and instability

31 Dec 2019
Research

Management

Kyoung Yong Kim, Pankaj C. Patel

Published in Organization Science, December 2020

Employee stock ownership is a widely used organizational practice to invigorate and empower employees for the betterment of organizational financial performance. But how effective is employee ownership across a range of different industry conditions? 
Dr. Kyoung Yong Kim of City University of Hong Kong, and Dr. Pankaj C. Patel of Villanova University in the United States set out to tackle this issue. 
“We found that employee ownership plans enhanced organizational performance the most in growing but unstable industries,” said Kim.
Based on data from 29 countries including the United Kingdom, France, Italy, and South Korea, Kim and Patel explained that in such industry conditions, employees did not only see the potential for greater economic gains but also recognized that their greater work efforts were especially important in realizing the potential gains, therefore contributing to organizational financial performance.     
A rationale behind the practice of employee stock ownership is that it creates a direct linkage between employees’ personal wealth and organizational performance, and the linkage improves employees’ work motivation. It allows distribution of wealth as well as enhancing employee and organization performance. Due to these benefits, policies on employee stock ownership are an important agenda for the Administration of U.S. President Joe Biden.