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 Co