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A Multilevel Contingency Model of Employee Ownership and Firm Productivity: The Moderating Roles of Industry Growth and Instability

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  • Kyoung Yong Kim

    (Department of Management, College of Business, City University of Hong Kong, Kowloon Tong, Hong Kong)

  • Pankaj C. Patel

    (Management and Operations, School of Business, Villanova University, Villanova, Pennsylvania 19085)

Abstract

Many studies have examined the relationship between employee ownership and firm productivity. However, research is lacking on how this relationship is strengthened or weakened by environmental characteristics. This is a critical oversight in the employee ownership literature because industry characteristics can significantly influence employees’ expected gains from their firm ownership. Thus, based on agency theory and expectancy theory, we develop a multilevel contingency model of employee ownership with industry growth and instability as boundary conditions. We test the proposed model with a sample of 573 firms in South Korea (Study 1: 1,415 firm years) and a sample of 892 firms in 28 European countries (Study 2: 4,768 firm years). In both studies, we find that employee ownership does not significantly contribute to firm productivity on its own. However, we find a significant three-way interaction effect of employee ownership, industry growth, and industry instability on firm productivity. Specifically, employee ownership is most effective at improving firm productivity when both industry growth and industry instability are high. We discuss the theoretical and practical implications of the findings.

Suggested Citation

  • Kyoung Yong Kim & Pankaj C. Patel, 2021. "A Multilevel Contingency Model of Employee Ownership and Firm Productivity: The Moderating Roles of Industry Growth and Instability," Organization Science, INFORMS, vol. 32(3), pages 625-648, May.
    • Handle: RePEc:inm:ororsc:v:32:y:2021:i:3:p:625-648
    DOI: 10.1287/orsc.2020.1404
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    References listed on IDEAS

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