Employee Ownership and Firm Performance: A review

Abstract

This article reviews the main streams of research on employee ownership over the past fifty years. It proposes several theoretical contributions to provide a more complex picture of the relationship between employee ownership and firm performance that goes beyond most existing work, which has tended to focus only on employee attitudes and behaviors. It shows that employee ownership can affect different performance indicators through different mechanisms, whereas past empirical research has often failed to make such a distinction.  The article does not provide a comprehensive review of the literature on these topics: rather, it highlights the main findings that have emerged from the literature to date, and suggests some avenues for future research. It is suggested that majority employee ownership is different in nature and effect from "classic" minority employee ownership plans for large companies, but the literature has tended to confuse the two. Future research will need to distinguish between the different forms of employee ownership if the impact of ownership is to be more accurately calibrated. The article is organized as follows. First, it reviews the research findings on types of ownership and the impact of stock plans. Second, it contributes to the literature on the "determinants" of the use of stock ownership plans by companies and the influences on employee participation in stock ownership plans. Next, it highlights the effect of share ownership on employees' attitudes and behavior and on company performance. Finally, the relationship between stock ownership plans and other forms of employee participation is demonstrated and reported with conclusions about managerial implications.

Keywords: employee ownership, employee attitudes and behavior, company performance, performance indicators, the impact of employee ownership, forms of employee participation

JEL Classification: L25, G32

Paper type: Theoretical Research