Why do firms adopt employee share ownership? Bundling ESO and direct involvement for developing human capital investments

Abstract

Purpose – The purpose of this paper is to examine the relationship between employee share ownership (ESO) and employer-provided training. To be more specific, as both ESO and involvement practices can contribute to developing human capital, the paper addresses the question of whether they are substitutes or complements in the relationship with training. Design/methodology/approach – The theoretical hypotheses are tested using the French nationally representative establishment-level survey, REPONSE, which is similar to the British WERS. The sample consists of 1,523 establishments. Findings – The results are consistent with studies conducted elsewhere (e.g. in the UK) and provide novel findings, thereby suggesting a complementarity between ESO and involvement practices with bundles of practices becoming increasingly more complex as training expenditures increase. Research limitations/implications – To provide further insights, future research that uses more precise information regarding ESO plans is needed. Practical implications – Results can provide HR managers with valuable information regarding the organisational characteristics necessary to ensure a fertile ground for their training expenses. Originality/value – The paper reflects a growing awareness that human capital development and share ownership plans may be related and that this relationship might be a more compelling explanation for share ownership plans than the standard agency theory. The contribution of ESO plans to the development of employee competencies may be at least as important as their possible effects on employee motivation and effort.

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