Abstract for: Under What Conditions Does Employee Ownership Work? A Model of Ownership Structure and High Performance Work System

Under what conditions does employee ownership improve firm performance? Employee ownership structure is part of a larger corporate system. To answer this question, one needs to unpack the underlying causal mechanism of how ownership structure affects the corporate system and how the corporate system and market conditions in turn influence the design of ownership structure. We developed a model of a startup company with various compensation and ownership structures, how they influence employee behaviors that drive business processes, and how those business processes interact with market conditions which generate firm performance in a dynamic feedback system. We conducted simulation analysis to study how various combination of salary, stock options, stock grants and profit sharing schemes influence firm performance overtime. We hope to contribute to the field of Strategic Human Resource Management by providing a model of the causal mechanisms between HR practices and firm performance.