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

Abstract

Purpose: In this research, we 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. Design/methodology/approach: The study analyzes an unbalanced panel sample of 614 organizations (1,601 organization-year data points) in South Korea, utilizing hierarchical linear modeling (HLM). Findings: The 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 implications: The 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, our results demonstrate that only the prospector firms, rather than defenders or analyzers, can reap the productivity benefit of broad-based ESO. Second, since