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

Abstract

The literature highlights the positive and negative effects of employee ownership on firm performance, which are heavily dependent on the type of employee-owned firm (EOF) analysed. This article focuses on EOFs created under policy-related schemes designed to incentivize job creation, especially in times of crisis. The authors 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. The results show that these EOFs have more difficulty accessing valuable resources, and show significantly worse long-term performance than the matched conventional companies. It is argued that the limitations imposed on becoming eligible to profit from the incentives of the schemes may result in the creation of firms that do not perform adequately in the long run.