What enables some employee ownership firms to overcome the free rider problem andmotivate employees to improve performance? This study analyzes the role of humanresource policies in the performance of employee ownership companies, using employeesurvey data from 14 companies and a national sample of employee-owners. Between-firmcomparisons of 11 ESOP firms show that an index of human resource policies, nominallycontrolled by management, is positively related to employee reports of co-workerperformance and other good workplace outcomes (including perceptions of fairness, goodsupervision, and worker input and influence). Within-firm comparisons in three ESOP firms,and exploratory results from a national survey, show that employee-owners who participatein employee involvement committees are more likely to exert peer pressure on shirking coworkers.We conclude that an understanding of how and when employee ownership workssuccessfully requires a three-pronged analysis of: 1) the incentives that ownership gives; 2)the participative mechanisms available to workers to act on those incentives; and 3) thecorporate culture which battles against tendencies to free ride.
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0658.
Find related papers by JEL classification: M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics M40 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - General O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
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