Are policy measures effective in encouraging the creation of competitive employee-owned firms?

Abstract

The literature highlights positive and negative effects of employee ownership on firm performance, which are heavily dependent on the type of employee-owned firm (EOF) analyzed. We focus on EOFs created under policy-related schemes designed to incentivise job creation, especially in times of crisis. We analyse performance in a large sample of a special type of EOFs in Spain and compare the results with those of a matched sample of conventional capitalist firms. Our results show that these EOFs have more difficult access to valuable resources, and show significantly worse long-term performance than their peers. We argue that the limitations imposed on becoming eligible to profit from the incentives of the schemes may derive in the creation of firms that do not perform adequately in the long run.