Ownership Culture and Strategic Adaptability

Abstract

Although abundant evidence demonstrates a positive relationship between
employee ownership and firm performance, two questions remain unanswered:
why does employee ownership fail to enhance the performance of some adopting
firms, and what are the mechanisms by which employee ownership enhances performance?
We argue that employee ownership has the potential to enable managers to
shape organizational culture in support of firm strategy. In supporting firm strategy,
employee ownership has the status of strategic choice. Further, to the extent that
organizational culture is strategy-appropriate, it leads to competitive advantage by
increasing the availability of resources, the serviceability of those resources to the
firm, and flexibility in the allocation of resources to address competitive threats and
opportunities. When managers of employee-owned firms are unable to create such a
culture, the performance of their firms suffers as a result.