Employee ownership and human resource management: a theoretical and empirical treatise with a digression on the Dutch Context

Doctoral Dissertation
Author: Kaarsemaker, Eric
Source: E.C.A. Kaarsemaker
Year: 2006
Number of pages: 8

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The first chapter introduces the topic of the study, which is employee ownership, or more precisely, a “people management” or “human resource management” (HRM) framework of the effectiveness of employee ownership. The introduction starts with three general and contemporary trends in the Netherlands that might occasion a study on this topic. Firstly, the growing importance of innovation for the competitiveness of companies. Secondly, changes relating to the workforce. These changes are important, since innovation is ultimately always about people: the innovators. And people, in turn, seem to have changed what they want as workers. Nowadays, workers expect recognition, challenging work, more opportunities for working according to capacity and for learning, and to be treated seriously. A third development relates to share ownership in general, which has become increasingly popular in large sections of the population. Developments on the stock market have generally received much media attention too. These three trends justify a study on employee ownership as an HRM innovation.

Employee ownership is defined as the amount of stock in their employing company that employees own directly, or indirectly through, for example, some kind of trust. The study does not directly focus on the “share option” and “worker cooperative” types of employee ownership, nor on employee ownership for which less than half of the total workforce is eligible. Having determined that, Chapter 1 continues to introduce the employee ownership and HRM scholarly literature. It is established that previous reviews of studies on the effectiveness of employee ownership have concluded that the majority of studies found favourable effects of employee ownership on HRM outcomes (e.g., commitment, satisfaction) and firm performance (e.g., profitability, productivity). At the same time, favourable effects appear not to come about automatically. However, the conditions necessary for employee ownership to yield favourable effects are as yet largely unknown. The main aim of this study is to determine what these conditions are. Since employee ownership is an HRM practice, the HRM context is the first contingency that should be dealt with. The present study therefore specifically focuses on the relationships (the “internal fit”) between employee ownership and other HRM practices, and provisionally assumes that other contingencies such as the competitive context and the company’s overall strategy, various organizational characteristics, and the institutional environment, are equal (i.e., the ceteris paribus condition applies).

The problem definition of this study is as follows: what are the effects of employee ownership, and of the internal fit between employee ownership and the HRM system, on HRM outcomes and firm performance? This problem definition is subdivided into four research questions: (1) What is employee ownership, and what is the effect of employee ownership on HRM outcomes and firm performance? (2) Where does this effect of employee ownership on HRM outcomes and firm performance come from? (3) What is the HRM system and what is the internal fit between employee ownership and the HRM system? (4) What is the effect of the internal fit between employee ownership and the HRM system on—the relationship between employee ownership and—HRM outcomes and firm performance? Some definitions: HRM systems are composed of several HRM activities, but the present study focuses on only two of these: the workforce philosophy (i.e., the beliefs about the relative role and value of workers), and the HRM practices (i.e., specific tools to execute HRM policies and to motivate the desired employee behaviour). Internal fit refers to the coherence or consistency of the HRM practices among themselves, and with the workforce philosophy.

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