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

Abstract

PurposeIn this research, the authors try to answer the question of when broad-based employee share ownership (ESO) is more likely to be used and how it can be managed more effectively from the vertical fit perspective in strategic human resource management (HRM).Design/methodology/approachThe study analyzes an unbalanced panel sample of 614 organizations (1,601 organization-year data points) in South Korea, utilizing hierarchical linear modeling (HLM).FindingsThe analysis demonstrates that organizations are more likely to adopt broad-based ESO when they utilize the prospector and analyzer strategies as opposed to the defender strategy. The analysis also reveals that the relationship between broad-based ESO and labor productivity is positive only when organizations utilize the prospector strategy as opposed to other types of strategies (i.e. analyzer and defender strategies).Practical implicationsThe findings first indicate that the decision to adopt a broad-based ESO in organizations should be informed by their business strategy if they want to enhance labor productivity. Specifically, the results demonstrate that only the prospector firms, rather than defenders or analyzers, can reap the productivity benefit of broad-based ESO. Second, since innovation is a major source of productivity for prospector firms, the findings demonstrate that a broad-based ESO can be a vehicle that drives innovation. As a result, firms may want to consider utilizing broad-based ESOs to foster innovation.Originality/valueThe findings emphasize the relevance of the “vertical fit” perspective in examining the broad-based ESO and firm productivity relationship. Most past research utilized the “horizontal fit” framework in refining the relationship between broad-based ESO and productivity. Thus, the study emphasizes the need to utilize the “vertical fit” perspective, and not only the “horizontal fit” perspective, in the broad-based ESO research. Through this, the study meaningfully extends the research on the productivity effect of broad-based ESO by adding an important moderator (i.e. strategy) to the model.

Employee productivity spillovers generated by incentive schemes

“…It is recommended that HR practices facilitate trade union involvement and support collective bargaining in productivity-based incentive schemes (Damiani et al 2016;Jones et al, 2008Jones et al, , 2010Lucifora & Origo, 2015). Yoon and Sengupta (2021) emphasise the link between business strategy, HRM practices and the implementation of incentive schemes aimed at improving employee productivity. This is even more critical in the current world of work, which requires agile approaches to improving employee productivity, including hybrid-pay incentives for individual and team-work settings (Dlamini et al, 2015).…”

“…Determining employee participation in the financial wellbeing of organisations through monetary or non-monetary incentives is important for examining how extrinsic and intrinsic motivation lead to productivity. Studies investigating monetary or non-monetary incentive schemes have been instrumental in our understanding of employee productivity and organisational performance (Adewuyi & Effiong, 2017;Adom et al, 2020;Aguinis et al, 2013;Antonietti et al, 2017;Damiani et al, , 2016Daniel, 2019;Gielen et al, 2010;Jones & Kato, 2012;Jones et al, 2008Jones et al, , 2010Jones et al, , 2012Jones et al, , 2017Kalmi & Sweins, 2010;Kato & Kauhanen, 2018;Kato et al, 2010;Lucifora & Origo, 2015;Mullins, 2022;Ortlieb et al, 2016;Park et al, 2022;Sesil & Lin, 2011;Sgarbossa et al, 2022;Singh & Chaudhary, 2022;Ude & Coker, 2012;Yang & Chen, 2019;Yoon & Sengupta, 2021). However, there is a lack of empirical knowledge in South Africa with findings on incentiveinduced employee productivity focusing on the monetary and non-monetary components using panel data analysis.…”

Determining the success of an employee share ownership scheme

“…Employees owning thin slices of where they work intends to boost their retention, by building belonging and enhanced mutual benefit. A research paper by Yoon and Sengupta (2021) explores where broad-based employee share ownership (ESO) is used, and suggests a theoretical model targeting strategic improvements in its benefits for participants. Publicly available data for the study were gathered from a sample from South Korea, of 614 organizations.…”