The purpose of this paper is to relate participative decision-making (PDM) to organizational learning, and examine the impact of PDM on organizational performance.
The paper integrates the resource-based theory with organizational learning theory to develop a framework, and distinguishes PDM in which decisions are jointly made by employees and managers from employee decision-making (EDM) in which decisions are completely in the hands of employees. The paper incorporates an augmented Cobb–Douglass production function into a structural equation model to estimate the performance impact of PDM and EDM.
The paper tests the framework against firm-level data form China, and finds that PDM provides an opportunity for collective learning, and has a positive relationship with productivity-based profit gains; the positive relationship is stronger in firms whose management has greater accumulated knowledge and experience; EDM fails to provide an opportunity for collective learning, and has a negative relationship with productivity-based profit gains.
Prior research focused on the role of PDM in enhancing the motivation and performance of individual employees, considered the degree of employee involvement as a continuum with the highest being decision-making “completely in the hands of employees,” and concluded that the more involved are employees in decision-making the better. This paper relates PDM to organizational performance, and challenges this conventional view from an organizational learning perspective.
The authors would like to thank the World Bank for providing the data, and Professor Martin Kahanec, Associate Editor of IJM, and anonymous reviewers for valuable comments and suggestions.
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