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The Anatomy of Employee Involvement and Its Effects on Firms and Workers

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  • Richard B. Freeman
  • Morris M. Kleiner
  • Cheri Ostroff

Abstract

A great many American firms have organized workplace decision-making in new ways to get employees more involved in their jobs -- using policies like self-directed work teams, total equality management, quality circles, profit-sharing, and diverse other programs. This paper uses a firm-based data set and employee-based information to illuminate several aspects about the locus and economic impacts of employee involvement (EI). Having information from employees as well as from firms allows us to ask not only what EI does for firms, the principal question in the literature on the subject, but also what EI does for workers; and to examine EI from the bottom up' perspective of participants rather than managers. We find that EI practices are linked in an hierarchical structure that provides a natural scaling of EI activities and the intensity of the EI effort. Firms that have EI are also more likely to have profit-sharing and other forms of shared compensation. However, EI has a weak and poorly specified effect on output per worker, but it has a strong and positive impact on employee well-being.

Suggested Citation

  • Richard B. Freeman & Morris M. Kleiner & Cheri Ostroff, 2000. "The Anatomy of Employee Involvement and Its Effects on Firms and Workers," NBER Working Papers 8050, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8050
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    1. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August.
    2. Morris M. Kleiner & Jonathan S. Leonard & Adam M. Pilarski, 1999. "Do Industrial Relations Affect Plant Performance?: The Case of Commercial Aircraft Manufacturing," NBER Working Papers 7414, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Derek C. Jones & Takao Kato, 2011. "The Impact of Teams on Output, Quality, and Downtime: An Empirical Analysis Using Individual Panel Data," ILR Review, Cornell University, ILR School, vol. 64(2), pages 215-240, January.
    2. Kato, Takao & Lee, Ju Ho & Ryu, Jang-Soo, 2010. "The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data," IZA Discussion Papers 5111, Institute for the Study of Labor (IZA).
    3. Leonid Krasnozhon, 2011. "Property rights and farm efficiency: evidence from Ukraine," Economic Change and Restructuring, Springer, vol. 44(4), pages 279-295, November.
    4. Annalisa Cristini & Tor Eriksson & Dario Pozzoli, 2013. "High-Performance Management Practices and Employee Outcomes in Denmark," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(3), pages 232-266, July.
    5. Susan Helper & Morris M. Kleiner, 2009. "International Differences in Lean Production, Productivity, and Employee Attitudes," NBER Chapters,in: International Differences in the Business Practices and Productivity of Firms, pages 231-261 National Bureau of Economic Research, Inc.
    6. Derek C. Jones & Srecko Goic, 2010. "Do Innovative Workplace Practices Foster Mutual Gains? Evidence From Croatia," William Davidson Institute Working Papers Series wp993, William Davidson Institute at the University of Michigan.
    7. Bauer, Thomas K., 2004. "High Performance Workplace Practices and Job Satisfaction: Evidence from Europe," IZA Discussion Papers 1265, Institute for the Study of Labor (IZA).
    8. Carstensen, Vivian, 2002. "The From-Tayloristic-to-Holistic-Organization Model From an Empirical Perspective," Hannover Economic Papers (HEP) dp-256, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    9. Schnabel, Claus & Wagner, Joachim, 2001. "Verbreitung und Bestimmungsgründe verschiedener Formen der Arbeitnehmerpartizipation in Industriebetrieben," Discussion Papers 5, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    10. Riccardo Leoni, 2013. "Organization of work practices and productivity: an assessment of research on world- class manufacturing," Chapters,in: Handbook of Economic Organization, chapter 17 Edward Elgar Publishing.
    11. Kato, Takao & Owan, Hideo, 2011. "Market characteristics, intra-firm coordination, and the choice of human resource management systems: Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 80(3), pages 375-396.
    12. Gera, Surendra & Gu, Wulong, 2004. "The Effect of Organizational Innovation and Information Technology on Firm Performance," The Canadian Economy in Transition 2004007e, Statistics Canada, Economic Analysis Division.
    13. Cottini, Elena & Kato, Takao & Westergaard-Nielsen, Niels, 2011. "Adverse workplace conditions, high-involvement work practices and labor turnover: Evidence from Danish linked employer–employee data," Labour Economics, Elsevier, vol. 18(6), pages 872-880.
    14. Hiroyuki Chuma & Takao Kato & Isao Ohashi, 2004. "What Japanese Workers Want: Evidence from the Japanese Worker Representation and Participation Survey," Discussion papers 04019, Research Institute of Economy, Trade and Industry (RIETI).
    15. Tushar Kanti Nandi, 2006. "Employee Participation and Wages: An Empirical Investigation with Selectivity Correction," Department of Economics University of Siena 483, Department of Economics, University of Siena.
    16. Addison, John T., 2005. "The Determinants of Firm Performance: Unions, Works Councils, and Employee Involvement/High Performance Work Practices," IZA Discussion Papers 1620, Institute for the Study of Labor (IZA).
    17. Maurizio Pugno & Sara Depedri, 2010. "Job Performance and Job Satisfaction: An Integrated Survey," Economia politica, Società editrice il Mulino, issue 1, pages 175-210.
    18. Martha A. Starr, 2006. "Macroeconomic dimensions of social economics: Saving, the stock market, and pension systems," Working Papers 2006-09, American University, Department of Economics.
    19. Morissette, Rene & Rosa, Julio, 2003. "Alternative Work Practices and Quit Rates: Methodological Issues and Empirical Evidence for Canada," Analytical Studies Branch Research Paper Series 2003199e, Statistics Canada, Analytical Studies Branch.
    20. Federica Origo & Laura Pagani, 2006. "Is Work Flexibility a Stairway to Heaven? The Story Told by Job Satisfaction in Europ," Working Papers 97, University of Milano-Bicocca, Department of Economics, revised Jun 2006.

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