S P E C I A L I S S U E A R T I C L E
All for one and one for all: A mechanism through which broad-
based employee stock ownership and employee-perceived
involvement practice create a productive workforce
Andrea Kim1 | Kyongji Han2
1SKK Business School, Sungkyunkwan (SKK)
University, Seoul, South Korea
2Hankamer School of Business, Baylor
University, Waco, Texas
Correspondence
Andrea Kim, SKK Business School, #33515
Business Bldg. 25-2 Sungkyunkwan-ro,
Jongno-gu, Seoul 03063, South Korea.
Email: [email protected]
Funding information
The Employee Ownership Foundation; The
Rosen Ownership Opportunity Fund
Drawing on social identity theory, this research frames a multimediational model that delineates
how broad-based employee stock ownership (BESO) and employee-perceived involvement prac-
tice in tandem yield a productive workforce at the organization level. In our theoretical model, we
propose that social cohesion and voluntary turnover are collective attitudinal and behavioral out-
comes resulting from the shared perception of we-ness that employees experience through both
participatory practices. Our path analysis of a multisource, time-lagged dataset from 176 large
U.S. companies revealed the sequential mediating roles of social cohesion and voluntary turnover
between these organizational practices and labor productivity. Our theoretical claims and empirical
evidence will contribute to a systematic understanding of how and why BESO and employee
involvement leverage greater organizational productivity from employees.
KEYWORDS
cohesion, employee involvement, employee participation, internal fit, labor productivity, stock
ownership, turnover
1 | INTRODUCTION
Broad-based employee stock ownership (BESO), in which equity
shares are offered to employees (Frye, 2004), has been widely utilized
by many organizations worldwide since the early 20th century
(Carberry, 2011) and in particular has been applied to approximately
28 million U.S. workers according to 2015 statistics from the National
Center for Employee Ownership. In accordance with its prevalence,
researchers have examined the effects of BESO on diverse outcomes
at the individual and organization levels, with compelling evidence for
performance effects (Mullins, 2018) such as positive attitudes and
behaviors of employees, improved labor productivity, greater financial
performance, and higher survival rates (Kruse, 2002; Kruse, Free-
man, & Blasi, 2010; Park, Kruse, & Sesil, 2004).
Although these favorable results indicate that BESO confers sus-
tained competitive advantages to organizations, several limitations are
present in the existing literature. For example, prior research is pre-
dominantly fragmented as a result of efforts to connect the effects of
BESO to only a particular facet of performance (e.g., employee, opera-
tional, or financial) outcomes. In the field of strategic human resource
(HR) management, researchers have long agreed that organizational
performance does not directly stem from HR practices, but instead
from the HR outcomes that these practices are designed to coherently
induce (Dyer & Reeve, 1995; Gerhart, 2005; Guest, 1997). In this vein,
it is essential to determine attitudinal and behavioral outcomes medi-
ating the effect of BESO on labor productivity at the organization
level. Furthermore, BESO has often been examined in isolation with-
out considering its relationships with other HR practices. Given that
employees in large organizations are typically exposed to BESO as
well as other relevant HR practices (Kim, Han, & Kim, 2017) such as
employee involvement (Kruse et al., 2010), it is imperative to investi-
gate the performance impact of BESO in relation to other HR
practices.
This research seeks to fill these gaps using a multimediational
model that delineates the mechanism through which BESO affects
organizational performance in relation to another HR practice. First,
based on social identity theory (Ashforth & Mael, 1989; Tajfel &
Turner, 1985), we propose that social cohesion and voluntary turn-
over are collective workforce outcomes mediating the link between
BESO and labor productivity. Second, we derive employee involve-
ment, which functions to empower employees as well as facilitate
their participation in decision-making and information sharing (Cotton,
1993; Lawler, 1986), as a “partner” HR practice of BESO from existing
ownership research (Milgrom & Roberts, 1992; Pendleton, Wilson, &
DOI: 10.1002/hrm.21958
Hum Resour Manage. 2019;58:571–584. wileyonlinelibrary.com/journal/hrm © 2019 Wiley Periodicals, Inc. 571
Wright, 1998; Pierce, Rubenfeld, & Morgan, 1991). Extending social
identity theory to the common goal of these participatory practices,
we suggest that BESO and employee-perceived involvement practice
jointly foster the shared perception of we-ness among employees,
promoting an array of organizational outcomes of interest. Finally, we
test our research model by conducting a path analysis using a
multisource- (i.e., supervisors, employees, and objective data) lagged
dataset for 176 large U.S. companies, combining the 2010 and 2011
Great Place to Work (GPTW) datasets.
Our findings provide significant insights into the employee own-
ership literature. They shed new light on the link between BESO and
labor productivity by illuminating intermediate outcomes such as
social cohesion and voluntary turnover. Although positive associations
between employee ownership and organizational outcomes have
been demonstrated in more than 100 studies at the organization level,
much less is known about the factors that mediate these associations
(Arthur & Aiman-Smith, 2001; Gerhart, Rynes, & Fulmer, 2009). Most
macro studies focusing on organizational outcomes have assumed
that shared ownership plans elicit productive attitudes and behaviors
from employees, while micro studies delving into individual attitude
and/or behavior at work have not been extended to organizational
performance. Given that participatory practices (i.e., BESO and
employee involvement) have long been acknowledged as ways to effi-
ciently produce organizational outputs (Y. Jiang, Colakoglu, Lepak,
Blasi, & Kruse, 2015) and are thereby a noteworthy feature of highly
productive organizations (J. A. Wagner, 1994), we focus on identifying
collective attitudinal and behavioral outcomes, such as social cohesion
and voluntary turnover, which eventually affect labor productivity.
Corresponding to the growing awareness of the need to explore the
psychological foundations of organizational effectiveness (Ployhart &
Hale, 2014), our integrative framework goes beyond prior research by
investigating how BESO in tandem with employee involvement con-
tributes to the intraorganizational environment, where employees
consort with each other and work together to improve organizational
labor productivity.
2 | THEORETICAL BACKGROUND AND
HYPOTHESES
2.1 | “We-ness” emanating from BESO and
employee-perceived involvement practice: Social
identity theory
Our argument that BESO immediately leads to collective attitudinal
and behavioral outcomes for labor productivity is underpinned by
social identity theory, which explains how individuals identify the self
with their social group and how their social identity affects their atti-
tudes and behaviors in the social group (Ashforth & Mael, 1989;
Tajfel & Turner, 1985). Social identity is defined as an individual's self-
concept (i.e., the way an individual perceives the self) deriving from
his or her knowledge of group membership (Tajfel, 1978) and shaped
by the social identification, which refers to a psychological state
reflecting an individual's readiness to define the self as a member of
his or her social group (Haslam, 2004) or the perception that “I
becomes we” (Brewer, 1991, p. 476). Social identity serves as a promi-
nent precursor for heightened commitment to the social group
(Meyer, Becker, & van Dick, 2006), as the identification process
engenders an individual's sense of sharing his or her fate with the
social group (Ashforth & Mael, 1989). In this vein, employees' social
identities are formed by their perceived one-ness with their organiza-
tions, which in turn motivates attitudinal and behavioral reactions
among employees benefiting their organizations rather than their self-
interest (Ashforth & Mael, 1989; Hogg & Terry, 2000; van Knippen-
berg, 2000). Furthermore, because group members share their social
identities with the social group and thereby perceive a collective
sense of similarity (Lee, Park, & Koo, 2015), the overall social identity
of the workforce shapes organizational membership, which both
describes and prescribes organizationally based attitudes and behav-
iors (Hogg & Terry, 2000).
Social identity theory catalyzes our understanding of the effec-
tiveness of BESO in two ways. First, it supports the consensus that
employee attitudes and behaviors may intervene between organiza-
tional practices and performance in the strategic HR management lit-
erature (Dyer & Reeve, 1995; Guest, 1997). From this standpoint,
organizational performance does not fully stem from the use of BESO
per se, but rather at least partially from the workforce attitude and
behavior intended by the practice (Schuler & Jackson, 1987). Second,
implementing BESO in broader groups of employees is effective for
inducing more employees to exhibit the attitudes and behaviors
required by BESO, because this can enlarge the group of employees
experiencing BESO and thereby foster the organizational identifica-
tion process (i.e., perceiving a sense of we-ness) among more
employees.
We extend social identity theory to determine some of the collec-
tive attitudinal and behavioral outcomes that may link the extensive
use of BESO to improved labor productivity at the organization level.
Specifically, we conjecture that social cohesion and voluntary turn-
over are the two outcomes connoting “we-ness” perceived through
the organizational identification enacted by BESO. We-ness generally
refers to closeness among members in social groups, which is built on
proximity and mutuality (Baumeister & Leary, 1995). That is,
employees who intimately interact with others (Weisband & Atwater,
1999) and perceive interdependence (Brewer & Gardner, 1996) tend
to like, and stick with, one another. Given that social identity arises
when an individual shares interests with his or her social group
(Meyer et al., 2006; Rousseau, 1989), BESO generates a situational
cue indicating that employees' interests (i.e., equity) are shared with
others in their organizations, which guides them to perceive the posi-
tive self as a share owner and mutual interdependence.
In addition to BESO, social identity theory also compels us to
regard employee involvement as another organizational practice
enhancing situational cues fostering social identity in the workforce.
According to social identity theory, employees estimate their relation-
ships with their organizations in terms of their roles and status, which
implies that employees perceiving themselves to have high status are
likely to sense a positive social identity (Tajfel, 1978; Tajfel & Turner,
1979). Employee involvement is an organizational practice intended
to facilitate communication and codetermination between employers
and employees (Kim et al., 2017). Employee involvement is grounded
572 KIM AND HAN
on “a conscious and intended effort by individuals at a higher level in
an organization,” and provides “opportunities for individuals or groups
at a lower level in the organization to have greater voice in one or
more areas of organizational performance” (Glew, O'Leary-Kelly, Grif-
fin, & VanFleet, 1995, p. 402). Thus, in decentralized organizations,
similar to high-status management, employees are formally encour-
aged to influence their organizational decision-making on diverse
proximal (e.g., work-related) and distal (e.g., firm level) issues
(Joensson, 2008), through information shared by the organizational
authority as well as communication between employees and manage-
ment (Cotton, 1993; Lawler, 1986). In fact, past studies (e.g., Fuller
et al., 2006; Joensson, 2008) have revealed that employee involve-
ment leads employees to identify themselves with their organizations.
This positive association between employee involvement and social
identity makes sense, because employee involvement signals that
employees are included in their organizations and that their opinions
are valued by the organizational authority (Fuller et al., 2006). These
findings are also attributed to a climate of open and participative com-
munication (Smidts, Pruyn, & Riel, 2001) and procedural justice
(Tyler & Blader, 2003), which promote organizational identification
that affirms employees' acceptance and worth as organizational mem-
bers. Taken together, in line with BESO sharing return rights or equity,
we suggest that employee involvement sharing control rights
(Milgrom & Roberts, 1992) or information and influence with
employees (Pierce et al., 1991) is another component fostering a par-
ticipative and shared work structure (Ben-Ner & Jones, 1995; Kruse,
2002; Pendleton et al., 1998), in which employees are likely to feel
we-ness. As such, although other theoretical views may support the
inclusion of different HR practices, social identity theory supports that
employee-perceived involvement practice is incorporated into our
multimediational model of BESO.
In particular, in line with prior research (e.g., Conyon & Freeman,
2004), we predict that BESO and employee-perceived involvement
practice have independent effects on organizational outcomes of
interest. K. Jiang et al. (2012) asserted that to improve work out-
comes, multiple HR practices pursuing a common goal have additive
relationships, in which practices independently affect desired out-
comes and the total effects of utilizing such practices are greater than
the effects of utilizing any single practice alone. As discussed above
based on social identity theory, BESO and employee-perceived
involvement practice facilitate the common goal of promoting the per-
ceived we-ness of the workforce. However, each practice has a sepa-
rate path to the desired goal: BESO allows employees to participate in
financial distribution, whereas employee involvement encourages
them to participate in other forms of decision-making at work. Hence,
both participatory practices exert their own effects on organizational
outcomes in an additive fashion.
On balance, BESO and employee-perceived involvement practice
independently contribute to a social context in which employees per-
ceive we-ness by experiencing managerial principles for common
prosperity based on sharing equity and joint decision-making. In this
sense, social cohesion and voluntary turnover constitute collective
attitudes and behaviors manifested by the social identity of the work-
force under BESO and employee involvement, and further result in
increased labor productivity.
2.2 | A collective attitudinal outcome:
Organizational social cohesion
In this research, we define organizational social cohesion as the aggre-
gate of shared senses of friendship, family, teamwork, and loyalty to
one another among employees at the organization level. Social cohe-
sion is a unit level variable (Friedkin, 2004) that captures shared
attraction and mutual liking among individuals based on their social
relations (Seashore, 1954; M. E. Shaw, 1981) and desire to maintain
social relationships (Brawley, Carron, & Widmeyer, 1993) and mem-
bership (Lott & Lott, 1965). Social cohesion is an essential element of
social integration (O'Reilly, Caldwell, & Barnett, 1989; Webber &
Donahue, 2001). Employees can be socially integrated at the organiza-
tion level (Hogg & Terry, 2000), and, therefore, organizational social
cohesion signifies how well employees in various units or departments
are integrated within an organization. Just as groups may possess
group level characteristics equivalent to individual characteristics
(Cohen & Bailey, 1997), organizations may possess organization level
characteristics analogous to group characteristics, such as justice per-
ceptions (Konovsky, 2000) and learning (Crossan, Lane, & White,
1999). In addition, since social cohesion can be understood in the mul-
tilevel nature of organizations, in which employees can be attracted
individually or collectively (Gully, Devine, & Whitney, 1995),
employees should have a collective identity and stick together in
socially cohesive organizations.
Given that sharing is an endeavor for building social relationships
(Gottman & DeClaire, 2001), BESO and employee involvement can
promote unity within organizations through a sense of we-ness and
strong psychological bonds. According to social identity theory, peo-
ple identify the self with their organization to enhance their self-
esteem (Ashforth & Mael, 1989) and thus have positive social identity
with enhanced self-esteem (Tajfel & Turner, 1979). People also recog-
nize their organizational memberships based on their social relation-
ships and roles (Hogg, Terry, & White, 1995). That is, they generally
have strong desires for positive sense of self and thereby seek to
maintain positive self-image by engaging in socially important and
salient roles (Ashforth & Kreiner, 1999). These key principles of social
identity theory imply that organizational social cohesion may be inten-
sified by HR practices that enable employees to define themselves
and others as constituents of the organization's positive identity.
Employee ownership and involvement are also positively related to
the organizational identification process (Long, 1980), and so the per-
ceived we-ness emanating from these HR practices can stimulate the
self-enhancement of organizational members. Furthermore, BESO and
employee involvement can pave pathways of interpersonal influence
among organizational members, which are essential to establish a
socially cohesive organization (Friedkin, 2004).
Specifically, BESO may enable employees to view their roles as
significant, and their coworkers as valuable partners. The financial
benefits of BESO, determined by stock prices reflecting entire busi-
ness outcomes at the organization level, are shared among employee
owners. BESO, in which the financial benefits of employees are posi-
tively correlated (Deutsch, 1949) and interdependent (Wageman &
Baker, 1997), can be described as a positive-sum game, providing
extrinsic rewards that prevent factionalism among eligible employees,
KIM AND HAN 573
as opposed to competition for limited valuable resources (as it occurs
when there is a single fixed pool of financial benefits).
In the case of employee involvement, such HR practices construct
a decentralized situation in which authority for decision-making and
access to organizational information are shared widely among organi-
zational members (Jackson, 1983). In such context, employees can
perceive enhanced self-esteem and the significance of their roles, as
they participate in making decisions with high-status managers
(Mitchell, 1973) and gain a better understanding about their jobs and
their organization's operations through communication and informa-
tion sharing with management (Schuler, 1979). Employees can also
acknowledge that their coworkers are important partners to achieve
common goals because they make decisions about work-related issues
together through a process of information and knowledge sharing
(Wright, Gardner, & Moynihan, 2003).
BESO and employee involvement for sharing equity and control
are hypothesized to imbue positive social identity among organiza-
tional members and provide the “glue” to unify their interests in a way
that fosters perceptions of we-ness. The extensive use of these HR
practices may create strong social cohesion in which employees feel a
sense of kinship with colleagues because everyone's roles are per-
ceived as more valuable, salient, and visible in their daily work rou-
tines. Thus, we propose:
Hypothesis 1 BESO (a) and employee-perceived involve-
ment practice (b) are positively related to social cohesion
at the organization level.
2.3 | A collective behavioral outcome:
Organizational voluntary turnover
In this research, we define organizational voluntary turnover as the
aggregate rate of voluntary employee separations within organizations
during a certain period. Voluntary turnover refers to employee-
initiated departures requiring replacement (McElroy, Morrow, & Rude,
2001) and has consistently been indicated to have a strong negative
relationship with organizational performance (Holtom, Mitchell, Lee, &
Eberly, 2008). Collective voluntary turnover is a collective emergent
phenomenon (Nyberg & Ployhart, 2013) that not only originates from
the behavior of individuals (Kozlowski & Klein, 2000) but also depends
on their social contexts and relationships (J. D. Shaw, 2011), including
supervisor turnover (Kacmar, Andrews, Van Rooy, Steilberg, & Cer-
rone, 2006) and colleagues' job search behaviors (Felps et al., 2009).
In line with a contextual view challenging the conventional
assumption that voluntary turnover is an individual level construct
(Hausknecht & Holwerda, 2013), we examine whether social cohesion
shaped by BESO and employee-perceived involvement practice
reduces voluntary turnover at the organization level. As proposed by
social identity theorists, employees maintain social identity by retain-
ing social memberships (Tajfel, 1974). Employees are more likely to
want to stay with colleagues in an organization where social identity
is positive and satisfactory (Tajfel & Turner, 1979). Socially cohesive
organizations established by BESO and employee involvement are
places where employees wish to stay to sustain their self-esteem and
thereby maintain positive social identity. As Harrison, Newman, and
Roth (2006, p. 307) noted, “the depth and breadth of interpersonal
relationships” are a major driver of retention (Mitchell, Holtom, Lee,
Syblynski, & Erez, 2001), such that employees with strong (i.e., deep
and broad) relationships with their colleagues are less likely to quit
their jobs and move to another employer (Mossholder, Settoon, &
Henagan, 2005). Organizational social cohesion is a reflection of
strong social bonds tying individuals together. In socially cohesive
organizations, employees can have not only affective benefits such as
increased morale and job satisfaction (Locke & Schweiger, 1979), but
also positive social identity. Consequently, cohesion resulting from
BESO and employee involvement leads to employee retention
(Gardner, Wright, & Moynihan, 2011).
In summary, if effectively and widely implemented, BESO and
employee involvement may benefit employees by providing enhanced
social relationships with other colleagues in the organization. Due to
the benefits (e.g., positive identity, increased morale, and satisfactory
relationships) engendered by teamwork, social interactions, and inclu-
sion in group communication inherent in BESO and employee involve-
ment, employees are likely to intensify social cohesion among
organizational members (Osterman, 1995) and subsequently deter
their voluntary turnover (Krackhardt & Porter, 1986). This leads to:
Hypothesis 2 BESO (a) and employee-perceived involve-
ment practice (b) are negatively related to voluntary turn-
over through social cohesion at the organization level.
2.4 | The sequential mediation of social cohesion
and voluntary turnover
Finally, in this study, we incorporate social cohesion and voluntary
turnover as two intermediate outcomes into a black box through
which BESO and employee-perceived involvement practice affect
labor productivity at the organization level. Stronger social cohesion
and lower voluntary turnover are potential advantages helping organi-
zations that extensively implement BESO and employee involvement
become more productive.
Social cohesion may be an immediate psychological outcome
enabling organizations to realize the productivity effects of BESO and
employee involvement. Previous research has identified that strong
social cohesion is a key feature of highly productive groups (Darley,
Gross, & Martin, 1952), due to the fact that the members of such
groups tend to be more oriented toward group goal attainment
(H. J. Klein & Mulvey, 1995), to be more responsible in their roles
(M. E. Shaw, 1981), and to engage in extra-role behaviors (Kidwell,
Mossholder, & Bennett, 1997). In addition, the members of strongly
cohesive groups tend to work as hard collectively as they do individu-
ally (Karau & Hart, 1998) and to perceive that other group members
also work as well as they can (Mulvey & Klein, 1998). Indeed, Liden,
Wayne, Jaworski, and Bennett's (2004) field study confirmed that
social cohesion is negatively related to social loafing by group mem-
bers in organizational settings. In socially cohesive groups, employees
are psychologically attracted to and attached to their colleagues. To
fulfill their need to sustain social affiliations with their favorite
574 KIM AND HAN
colleagues, they work harder and contribute to group goals
(M. E. Shaw, 1981). Likewise, employees who work in socially cohe-
sive organizations are more likely to perform their jobs in a productive
manner. Organizational social cohesion helps to establish and enforce
norms that encourage hard collaborative working while alienating free
riders. Employees who are strongly attracted and attached to other
members in their organizations are likely to maintain organizational
membership to work within a cooperative community of workers, as
well as to have work motivation that helps sustain their organizations.
Voluntary turnover may be an intermediate behavioral outcome
activating the productivity effects of BESO and employee involve-
ment in socially cohesive organizations. It has widely been recognized
that voluntary turnover is more disruptive and costly to organizations
than other types of turnover (Holtom et al., 2008). The negative con-
sequences of voluntary turnover are attributed to depletion of human
capital resources (e.g., employee knowledge, skills, abilities, and per-
sonality traits; Nyberg & Ployhart, 2013) and subsequent fracturing of
social capital (Dess & Shaw, 2001). Organizational voluntary turnover
also leads to disruptions in the collective functioning of the workforce
and entails extra costs of recruitment, selection, newcomer socializa-
tion, and training (Bluedorn, 1982; Hausknecht & Trevor, 2011; Mob-
ley, 1982; Staw, 1980). Due to such inefficiency in cooperation and
coordination, aggregate voluntary turnover is detrimental to labor pro-
ductivity at the organization level (Osterman, 1987), as confirmed by
meta-analytical reviews (e.g., Heavey, Holwerda, & Hausknecht, 2013;
T.-Y. Park & Shaw, 2013). As such, lower voluntary turnover due to
social cohesion in organizations that effectively and widely implement
BESO and employee involvement is likely to result in better labor
productivity.
In conclusion, all aforementioned theoretical reasoning and dis-
cussions suggest that social cohesion and voluntary turnover lead to
sequential mediating effects between participatory practices and labor
productivity. That is, the extensive use of BESO and employee
involvement encourages wider groups of employees to perceive we-
ness. This in turn fosters social cohesion, which is an important social
mechanism that suppresses collective voluntary turnover (Nyberg &
Ployhart, 2013), ultimately leading to improved labor productivity.
Hence, we propose the following:
Hypothesis 3 BESO (a) and employee-perceived involve-
ment practice (b) are positively related to labor produc-
tivity through social cohesion and voluntary turnover at
the organization level.
3 | METHODS
3.1 | Sample and data
In this research, we combined and analyzed 2010 and 2011 datasets
from the GPTW Institute (www.greatplacetowork.com), which has
been administering surveys since 1998 to create a list of the “100
Best Companies to Work for in America” that is published by Fortune
magazine every January. To test our theoretical model, we used the
2010 GPTW dataset for BESO, employee-perceived involvement
practice, organizational social cohesion, and collective voluntary turn-
over, as well as the 2011 GPTW dataset for organizational labor pro-
ductivity. The GPTW Institute provided access to data from
companies included in the “100 Best Companies to Work for in Amer-
ica” list, as well as those that applied but were not ranked in the list,
under a confidentiality agreement that allowed data analysis on a
GPTW Institute server. After excluding some outliers and matching
participant companies during the period of 2010–2011, we analyzed
information for 176 companies and 73,195 full-time employees (aver-
age 415.88 full-time employees per company).
The GPTW dataset …