A Research Review on Democratic Firms: Employee-Related and Societal Outcomes for Alternative Futures?

Visions for futures alternative to a ‘post-democratic’ erosion of economies and business organizations may benefit from research on both social success and failures of democratic enterprises. Menahem Rosner (1996) considered democratic enterprises as ‘social laboratories’ offering democratic decision making and democratic leadership as learning field for democratic engagement. Whereas several research reviews focussed upon only moderate forms employees’ participation on the level of workplace autonomy or self-managed work groups, only little quantifying research exists on substantive democratic structures, where employees exercise influence over tactical or strategic decision-making (last review: Kruse, 2002). For that reason, descriptive scientific knowledge gained under conditions that rule over conventional capitalist enterprises will develop a ‘normative power of the facts’. Although embedded into a capitalist market economy, researching democratic companies may allow to gain alternative knowledge about employee-related and societal outcomes of organizational behavior.

Hence, based on a typology of high participative enterprises (Unterrainer, Palgi et al., 2011; e.g. democratic reform enterprises, workers cooperatives, and basis-democratic employee-owned firms), we conducted an extensive literature search in social science data banks for studies between 1970 and 2015 including quantitative data. The results indicate that structurally anchored democracy is associated with an employee-supporting organizational climate. Further, mere employee ownership does not guarantee that corresponding workers perceive a high level of influence in tactical or strategic decisions. The latter depends also on the concrete system of democracy in the respective enterprise. Further, direct participation seems more frequently related to employees’ work satisfaction, job involvement, and organizational commitment than their pure collective ownership status.

Mixed results support Pateman’s (1970) spillover hypotheses suggesting that direct participation in democratic decision making more than a democratic structure alone positively influences workers’ prosocial work behaviors and civic orientations toward societal or cosmopolitan issues. Fostering and hampering factors of those educative effects will be discussed.