Employee-owned firms and Support Organizations: Are we there yet?

31 Pages Posted: 5 Dec 2024

See all articles by Derek C. Jones

Derek C. Jones

Hamilton College - Economics Department

Date Written: October 29, 2024

Abstract

An important form of the employee-owned firm (EOF) is the producer cooperative (PC). The performance of PC sectors typically appears to have been much helped by extensive institutional infrastructure (Smith, 2003; Jones, 2023). By contrast, U.S. EOFs (which are predominantly ESOPs), are served by organizations that are much more limited in scope and nature. Is this institutional architecture for U.S. SOs a factor in accounting for the overall (and recently disappointing) performance of the U.S. employee-owned sector? Or are institutional set-ups for SOs for both forms of EOF essentially efficient, with differences in SO design primarily reflecting varying contexts (Europe vs. the U.S.) and a focus in the U.S. on growth in EO primarily by conversions of conventional firms, compared to what for PCs, in the past at least, was a focus on start-ups?

To examine these issues, I outline two competing conceptual frameworks. But I focus mainly on actual institutional differences in SOs. I extend a simple typology for SOs originally developed for PCs. By accessing descriptive information on U.S. SOs, I tentatively conclude that U.S. EOFs may be faced by SOs with some limits in institutional capacity. I conjecture that some individual SOs may have an unduly narrow range of activities while there may be unnecessary duplication in some support functions across SOs; the overall configuration of SOs may also have some inefficiencies. These potential limitations in the design of U.S. SOs for EOFs may have contributed to the recent flat-lining in growth of the overall employee-owned sector and may hinder future growth that many predicate on likely forthcoming policy initiatives (notably the Employee Equity Investment Act). Based on my interpretation of the limited theoretical and empirical evidence for U.S. SOs, I make some tentative suggestions for institutional innovations, mainly in the private sector.

Suggested Citation

Jones, Derek C., Employee-owned firms and Support Organizations: Are we there yet? (October 29, 2024). Available at SSRN: https://ssrn.com/abstract=5006484 or http://dx.doi.org/10.2139/ssrn.5006484

Derek C. Jones (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States
315-859-4381 (Phone)
315-859-4477 (Fax)

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