This article revisits the relationship between employees’ financial
participation in the firm and productive efficiency. The most recent empirical work
highlights a growing number of influences on the success (or otherwise) of financial
participation - organizational and labour force characteristics as well as the
operation of ‘bundles’ of participatory arrangements. Yet, to
date the empirical literature has relied totally on the conventional production
function specification to investigate these issues. This article is an attempt to
move beyond this approach and consider the merits of an alternative specification of
the production technology, the stochastic production frontier. For this
study’s data at least, the findings confirm this potential, revealing an
alternative interpretation of the effectiveness of financial participation and
additional insights into their ability to improve the level and variability of
technical inefficiency within firms.
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