Does governance confer organisational resilience? Evidence from UK employee owned businesses

Lampel, J., Bhalla, A. & Jha, P. P. (2014). Does governance confer organisational resilience? Evidence from UK employee owned businesses. European Management Journal, 32(1), pp. 66-72. doi: 10.1016/j.emj.2013.06.009

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Abstract

Current economic crisis has highlighted the importance of an organization's ability to withstand economic shocks. This has rekindled interest in organization resilience on the one hand, and the relationship between alternative governance forms such as employee owned businesses (EOBs) on the other. We explore this relationship using performance data on 204 publicly traded non-employee owned businesses and 49 EOBs prior to the economic downturn (2004-2008), and during the economic downturn (2008-2009). This data is complemented with a survey of resilience related governance and organizational practices in 41 EOBs and 22 non-EOBs. Our results show that: (a) employee ownership that is combined with employee involvement in firm governance is associated with greater stability in business performance over a business cycle; (b) EOBs have longer investment payback horizon when compared to non-EOBs across a number of activities; (c) Top management in EOBs are more likely to seek employee input in strategic decision making; (d) EOBs are more likely to use employee involvement to achieve tighter coupling between feedback from operations and the setting of strategic direction for the firm. These results suggest that employee stock ownership programs alone are not sufficient to develop higher levels of organizational resilience. Managers must combine employee stock ownership with employee involvement in governance if they wish to build up resilience in advance of adverse economic conditions.

Item Type: Article
Additional Information: NOTICE: this is the author’s version of a work that was accepted for publication in European Management Journal. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Management Journal, Volume 32, Issue 1, February 2014, Pages 66–72, http://dx.doi.org/10.1016/j.emj.2013.06.009.
Uncontrolled Keywords: Employee-owned business, Employee-ownership, Firm performance, Organisational resilience, Ownership and governance
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: Cass Business School > Faculty of Management
URI: http://openaccess.city.ac.uk/id/eprint/5972

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