Moderating effect of pay dispersion on the relationship between employee share ownership and labor productivity

Abstract

The moderating effect of pay dispersion on the relationship between employee share ownership (ESO) and labor productivity is examined in an unbalanced panel sample of 533 organizations (1,156 organization‐year data points) in Korea. Pay differential between job levels (vertical pay dispersion) is theorized to negatively moderate the ESO–productivity relationship. On the other hand, pay differential within a job level (horizontal pay dispersion) is theorized to positively moderate the ESO–productivity relationship. These predictions are partially supported. Consistent with the prediction, vertical pay dispersion negatively moderates the ESO–productivity relationship in that the relationship is more negative when vertical pay dispersion is high. However, we found no support for the moderating effect of horizontal pay dispersion in this relationship. The results challenge the simplistic view that pay dispersion per se can be detrimental to the ESO–productivity relationship.

Employee share ownership, training, and early promotion policy as a bundle in enhancing labor productivity: A test of the three‐way interaction effect

“…While the majority of the empirical evidence suggests that ESO schemes are associated with higher labor productivity E. Kim & Ouimet, 2014;Kumbhakar & Dunbar, 1993;Park & Song, 1995) and firm performance Bryson & Freeman, 2010;Fernie & Metcalf, 1995;Long, 1978;McNabb & Whitfield, 1998;O'Boyle et al, 2016;Pendleton, 2001;Sengupta, 2008;Sengupta et al, 2007), others demonstrate no effect (D. Kruse, 1992;Pendleton, 1997;Sengupta & Yoon, 2018).…”

“…While the majority of the empirical evidence suggests that ESO schemes are associated with higher labor productivity (Freeman et al, ; E. Kim & Ouimet, ; Kumbhakar & Dunbar, ; Park & Song, ) and firm performance (Blasi et al, ; Bryson & Freeman, ; Fernie & Metcalf, ; D. L. Kruse et al, ; Long, ; McNabb & Whitfield, ; O'Boyle et al, ; Pendleton, ; Sengupta, ; Sengupta et al, ), others demonstrate no effect (D. Kruse, ; Pendleton, ; Sengupta & Yoon, ). Furthermore, a positive, yet small, productivity effect was evident in a recent meta‐analysis of 102 studies representing 56,984 firms from around the world (O'Boyle et al, ).…”

“…In alignment with this argument, a recent meta‐analysis of 102 studies from around the world by O'Boyle, Patel, and Gonzalez‐Mule () shows a positive and statistically significant relationship between ESO and firm performance, but only at a small magnitude (weighted mean correlation = .04). Although the overall productivity effect seems positive, the magnitude of this effect varies across studies, with some studies reporting no effects on productivity (D. Kruse, ; Pendleton, ; Sengupta & Yoon, ).…”

The role of business strategy on the adoption and effectiveness of broad-based employee share ownership

“…Freeman et al , 2010; Kim and Ouimet, 2014) to insignificant outcomes (e.g. Kruse, 1992; Sengupta and Yoon, 2018; Yoon and Sengupta, 2019a). This raised doubts about Kleins (1987) “intrinsic” satisfaction model and whether the presence of ownership per se is a sufficient condition in fostering feelings of ownership and the resultant performance effects expected of ESO schemes.…”

“…Freeman et al , 2010; Kim and Ouimet, 2014), the magnitude of this effect varies across studies, with some studies reporting no productivity/performance effects (e.g. Kruse, 1992; Sengupta and Yoon, 2018; Yoon and Sengupta, 2019a). The mixed evidence has contributed to the emergence of contingency arguments that acknowledges the role of contextual factors in moderating this relationship (Kaarsemaker and Poutsma, 2006; Kruse et al , 2010; Sengupta, 2008; Yoon and Sengupta, 2019b).…”