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This article describes the practical and theoretical implications relating to the labor managed firm (LMF), which has been formed from an insolvent company purchased by its workers. The research focuses on an international comparison and the cultural context of six LMFs – two each in the United States, Spain, and Italy where legislation supports worker buyouts from insolvency. Adopting a critical theoretical approach it draws on the scholarship of industrial relations and human resource management, grounded in a historical analysis to predict when a transformative or integrative LMF will be formed.

Taking a case study methodology to enable an in-depth understanding of the firms internal processes and relationships the use of semi-structured interviews of blue- and white-collar workers (with the use of a translator) and the administration of a structured questionnaire are used to gather and triangulate qualitative and quantitative data. The research limitations relate to the small number of respondents in each firm, which prevented more rigorous analysis, and calls for further research with larger numbers of respondents.

The results reveal that at macro level the theoretical model predicts that the LMF will have a propensity to emerge when there are market failures, when there is support from the state and the labor movement. The type of LMF was found to depend on the national context of industrial relations. At the micro level a core set of practices were found to work together to lead to high member commitment and positive behavioral outcomes.

The research has important social implications by informing public policy aimed at redressing the injustice to employees when a business fails and jobs and entitlements are lost.

The article advances an understanding of the theoretical nature of the LMF.