Who uses employee financial participation in an adverse environment? The case of Estonia

Abstract

This article focuses on profit-sharing and employee share ownership practices, with the aim of analysing the effect of company size and industry on financial participation, as well as the substitution or complementary effect of other direct and indirect participation methods adopted in Estonian private companies. The article uses survey data from more than 900 Estonian companies obtained via telephone interviews in 2011. The results indicate that share ownership is more common in micro enterprises, but contrary to expectations the incidence of employee financial participation is no higher in knowledge intensive sectors. The results also show that financial participation has different complementarities depending on the scheme. It seems that profit-sharing is part of the ‘package’ of employee participation, but this does not apply to employee share ownership. The article challenges the common understanding that certain innovative service sectors and bigger companies are more inclined to adopt employee financial participation; and raises doubts about the presumed development towards a higher degree of financial participation in Eastern European countries.