Ownership Culture and Strategic Adaptability

Although abundant evidence demonstrates a positive relationship betweenemployee ownership and firm performance, two questions remain unanswered:why does employee ownership fail to enhance the performance of some adoptingfirms, and what are the mechanisms by which employee ownership enhances performance?We argue that employee ownership has the potential to enable managers toshape organizational culture in support of firm strategy. In supporting firm strategy,employee ownership has the status of strategic choice. Further, to the extent thatorganizational culture is strategy-appropriate, it leads to competitive advantage byincreasing the availability of resources, the serviceability of those resources to thefirm, and flexibility in the allocation of resources to address competitive threats andopportunities. When managers of employee-owned firms are unable to create such aculture, the performance of their firms suffers as a result.