Abstract
Employee-owned firms (EOFs) form part of the so-called social economy, and they are seen as an alternative business model that aims to establish itself as a third way, different to conventional capitalist firms and public enterprises. These firms meet the Spanish legal requirements (Law 44/2015) for employee ownership designation. This paper assesses whether the capital ownership structure is a key factor determining operating performance, productivity and solvency, or in other words, the impact the firm’s capital ownership structure may have on its economic performance, labour factor and capital factor. Based on a sample of small employee-owned firms and non-employee owned firms, the study develops an empirical methodology using a panel data analysis. The study shows the characteristics of Spain’s EOFs as an alternative legal form of employee share ownership, which is included in the Social Economy, but different from cooperative societies.
Highlights
Employee share ownership is clearly gaining momentum
Employee-owned firms (EOFs) form part of the so-called social economy, and they are seen as an alternative business model that aims to establish itself as a third way, different to conventional capitalist firms and public enterprises
The results demonstrate that the capital ownership structure that differentiates the employee-owned firms (EOFs) from the non-EOFs influences value added and return on assets (ROA) negatively, which is in contrast to the results found in some previous empirical studies (O’Boyle et al, 2016; Melgarejo, Arcelus & Simon, 2007b, Kruse & Blasi, 1995)
Summary
The economic crisis has increased interest in promoting these employee-owned businesses as a way of striving for economic democracy and as an alternative to capitalist enterprise, one that looks to find a balance between labour and capital, to improve economic performance or sectors of the economy, wage flexibility and wage moderation (Poutsma, Nijs & Poole, 2003). Employee share ownership takes different forms such as employee share ownership plans, a typical form that is popular in the U.S.A. not used much in Europe. Further variants include producer co-operatives, in which all the firm’s shares are collectively owned by its workforce, or employee buy-outs (EBOs), under which the company’s shares are purchased exclusively by its individual employees (Poutsma, Nijs & Poole, 2003).
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