1

THE ENGAGED ORGANIZATION

HUMAN CAPITAL SOCIAL CAPITAL GREEN CAPITAL AND LABOR PRODUCTIVITY

Magali Delmas University of California Los Angeles1

and

Sanja Pekovic University of Dauphine Paris

DRAFT

ABSTRACT

In this paper we develop a model of the engaged organization which shows how human capital can

interact with social and green capital to influence organizational outcomes particularly labor productivity

We argue that engaged organizations that facilitate knowledge sharing and learning employee motivation

and commitment to the organization can demonstrate increased labor productivity We test our hypotheses

with French survey data that detail employee characteristics from 5 210 respondents for 1988 firms Our

results show that higher levels of labor productivity are associated with greater financial participation

interpersonal contact inter-firm partnerships and proactive environmental management practices

Keywords labor productivity social capital green capital human capital intellectual capital

1 Contact delmasuclaedu

2

INTRODUCTION

The strategy literature has paid particular attention to how organizational resources and capabilities

including inter-firm relations and to a lesser extent environmental innovation impact firm performance

(Mowery Oxley amp Silverman 1996 Gulati 1998 Dowell Hart amp Yeung 2000 Russo amp Fouts 1997)

However the strategy literature has only recently recognized the strategic importance of human resources

(Koch amp McGrath 1996) In contrast the human resources literature has devoted most of its attention to

understanding how the development of human capital within the firm influences organizational outcomes

such as labor productivity (Guthrie 2001 Datta Guthrie amp Wright 2005) In this paper we bridge these

two literatures using a model of the engaged organization which shows how human capital can interact

with other forms of intellectual capital to influence organizational outcomes particularly labor

productivity

In the engaged organization employees have high levels of interpersonal contact with other employees

and also have a stake in the firmrsquos financial returns They are part of a broader organizational environment

that goes beyond the boundaries of the firm to include alliances with other organizations and commitment

to improving the natural environment Our focus on the engaged organization unveils significant

interrelation among sources of human social and green forms of capital This is evident in the links

revealed between the adoption of environmental and other organizational practices and corporate

performance In this way we respond to the call made by some scholars to open the organizational black

box in order to understand the organizational changes associated with ldquogreeningrdquo a firm (Jackson

Renwick Jabbour amp Muller-Camen 2011 Delmas amp Toffel 2008)

We argue that engagement by employees and the firm with external organizations and the firmrsquos

commitment to improving the natural environment through the adoption of proactive environmental

practices lead to higher organizational performance We discuss the ways in which engaged organizations

can facilitate knowledge sharing and learning employee motivation and commitment to the organization

and demonstrate increased labor productivity We test our hypotheses with data obtained from French

surveys that detail employee characteristics from 5 210 respondents for 1988 firms Our results show that

3

higher levels of labor productivity are specifically associated with greater financial participation

interpersonal contact inter-firm partnerships and proactive environmental management practices

Our study seeks to advance intellectual inquiry at the intersection of strategic management and the

management of human capital By describing how interactions among sources of human social and green

forms of capital can influence firm-level outcomes we hope to provide a deeper theoretical and empirical

understanding of human-based organizational performance

LITERATURE REVIEW

Human capital a form of intellectual capital is defined as ldquoa unit level resource that is created from the

emergence of individualrsquos knowledge skills abilities and other characteristicsrdquo (Ployhart amp Moliterno

2011 128) Previous studies have argued that human capital manifests across organizational levels

(Ployhart amp Moliterno 2011) and has a positive influence on competitive advantage (Edvinsson amp

Malone 1997 Johnson 1999 Stewart 1997) Human capital can be at the core of a resource-based

advantage if it is valuable rare and can be kept from rivals (Coff 2002)

However organizational behavior and organizational performance cannot be explained simply in terms of

personal attributes The individualrsquos behavior and performance will be determined by the organizational

climate the structure of the organization and the organizationrsquos socialization processes as well as by

individual characteristics (Tomer 1990) The concept of social capital has been increasingly used to

represent the ldquogoodwill that is engendered by the fabric of social relations and that can be mobilized to

facilitate actionrdquo (Adler amp Kwon 2002 17) Social capital is correlated with human capital but social ties

are distinct from education or training which have been used to measure human capital (Nahapiet amp

Ghoshal 1998 Blyer amp Coff 2003) Social capital contributes to the organizational context for human

capital and has proven to be a powerful factor explaining organizational performance such as innovation

and inter-firm learning (Gabbay amp Zuckerman 1998 Kraatz 1998) However according to Payne

Moore Griffis and Autry (2011 1) ldquoWhile social capital has been applied at the individual group and

organizational levels of analysis researchers have yet to embrace social capital as a multilevel lens to

better understand management and organizational phenomenardquo

4

More recently the concept of green capital has been offered by Chen (2008) who defines it as the

ldquoemployeesrsquo stocks of knowledge skills capabilities experiences attitude wisdom creativities and

commitments about environmental protection or green innovationrdquo (Chen 2008 275) An extensive

literature has focused on explaining the determinants of organizational engagement beyond the firm to

improve the natural environment through the adoption of environmental practices and standards (Delmas

amp Toffel 2008) Understanding the relationship between the adoption of environmental practices and

financial performance has been the focus of considerable research since the 1970s (Orlitsky Schmidt amp

Rynes 2003 McWilliams amp Siegel 2011) However the literature so far has focused mainly on the

impact of the adoption of environmental practices at the macro level and it has remained unclear exactly

how these practices impact organizational effectiveness employee productivity and green capital per se

Until now mostly anecdotal evidence has been presented to support the argument that greater employee

loyalty and productivity occur at environmentally or socially-responsible firms (Delmas amp Pekovic 2012)

Recent research though shows that intellectual capital related to green innovation or environmental

management has a positive impact on competitive innovation (Chen 2008 Delmas Hoffmann amp Kuss

2011)

While research has defined these different forms of capital and explored their influence on organizational

performance no study to date has combined them Little research exists for example on the value of the

organizational context in the development of human capital Abell Felin and Foss are among those who

suggest that ldquosubstantial attention be paid to explanatory mechanisms that are located at the level of

individual action and (strategic) interactionrdquo (Abell Felin amp Foss 2008 489) Similarly while

circumstantial evidence provided by consultants and managers describes the value of green capital in

enhancing human capital engagement rigorous research is scarce on this issue In this paper we analyze

the direct impact of sources of human social and green types of capital on labor productivity and their

interaction

Scholars have used different measures of organizational performance These include human resource

outcomes (turnover absenteeism job satisfaction) organizational outcomes (productivity quality

service) financial accounting outcomes (ROA profitability) and capital market outcomes (stock price

5

growth returns) (Dyer amp Reeves 1995) According to Dyer and Reeves (1995) human resource strategies

are most likely to directly impact human resource outcomes followed by organizational financial and

capital market outcomes In this paper we focus on organizational outcomes looking more specifically at

labor productivity as a reliable and widely used measure of the effect of human resources on organizational

performance

Samuelson and Nordhaus define labor productivity as ldquototal output divided by labor inputsrdquo (1989 980)

High labor productivity is therefore a desirable outcome Labor productivity measures the extent to which

the human capital is delivering value to the firm A firm that excels in the creation of human capital

resources should have people who are highly productive relative to the competition (Koch amp McGrath

1996 Porter 1985)

The literature has emphasized the role of human skills and human capital on labor productivity Human

capital stock accumulated through training activities is one of the main factors of production (eg Lynch

1994) Investment in human resources has been recognized as a significant source of competitive

advantage since such investments can lead to more effective employees (Porter 1985) One of the key

tools for investing in human resources is training (Jennings Cyr amp Moore 1995) Scholars have argued

that training is profitable as it increases the specificity of human capital assets making it more difficult for

competitors to imitate (Koch amp McGrath 1996) Empirical evidence corroborates this conclusion and

shows that training is positively associated with labor productivity improvement (Dearden Reed amp Van

Reenen 2006 Conti 2005 Zwick 2004 Rennison amp Turcotte 2004 Koch amp McGrath 1996)

In this paper we propose a broader view of human capital management beyond the human resources

department where firms not only provide employees with training to improve their knowledge and skills

but also encourage employees to engage in interpersonal contact with their colleagues and to have a stake

in the success of the organization We argue that employees engaged in these ways will be more

productive in organizations that are open to relations with other firms and that invest in environmental

practices

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

2

INTRODUCTION

The strategy literature has paid particular attention to how organizational resources and capabilities

including inter-firm relations and to a lesser extent environmental innovation impact firm performance

(Mowery Oxley amp Silverman 1996 Gulati 1998 Dowell Hart amp Yeung 2000 Russo amp Fouts 1997)

However the strategy literature has only recently recognized the strategic importance of human resources

(Koch amp McGrath 1996) In contrast the human resources literature has devoted most of its attention to

understanding how the development of human capital within the firm influences organizational outcomes

such as labor productivity (Guthrie 2001 Datta Guthrie amp Wright 2005) In this paper we bridge these

two literatures using a model of the engaged organization which shows how human capital can interact

with other forms of intellectual capital to influence organizational outcomes particularly labor

productivity

In the engaged organization employees have high levels of interpersonal contact with other employees

and also have a stake in the firmrsquos financial returns They are part of a broader organizational environment

that goes beyond the boundaries of the firm to include alliances with other organizations and commitment

to improving the natural environment Our focus on the engaged organization unveils significant

interrelation among sources of human social and green forms of capital This is evident in the links

revealed between the adoption of environmental and other organizational practices and corporate

performance In this way we respond to the call made by some scholars to open the organizational black

box in order to understand the organizational changes associated with ldquogreeningrdquo a firm (Jackson

Renwick Jabbour amp Muller-Camen 2011 Delmas amp Toffel 2008)

We argue that engagement by employees and the firm with external organizations and the firmrsquos

commitment to improving the natural environment through the adoption of proactive environmental

practices lead to higher organizational performance We discuss the ways in which engaged organizations

can facilitate knowledge sharing and learning employee motivation and commitment to the organization

and demonstrate increased labor productivity We test our hypotheses with data obtained from French

surveys that detail employee characteristics from 5 210 respondents for 1988 firms Our results show that

3

higher levels of labor productivity are specifically associated with greater financial participation

interpersonal contact inter-firm partnerships and proactive environmental management practices

Our study seeks to advance intellectual inquiry at the intersection of strategic management and the

management of human capital By describing how interactions among sources of human social and green

forms of capital can influence firm-level outcomes we hope to provide a deeper theoretical and empirical

understanding of human-based organizational performance

LITERATURE REVIEW

Human capital a form of intellectual capital is defined as ldquoa unit level resource that is created from the

emergence of individualrsquos knowledge skills abilities and other characteristicsrdquo (Ployhart amp Moliterno

2011 128) Previous studies have argued that human capital manifests across organizational levels

(Ployhart amp Moliterno 2011) and has a positive influence on competitive advantage (Edvinsson amp

Malone 1997 Johnson 1999 Stewart 1997) Human capital can be at the core of a resource-based

advantage if it is valuable rare and can be kept from rivals (Coff 2002)

However organizational behavior and organizational performance cannot be explained simply in terms of

personal attributes The individualrsquos behavior and performance will be determined by the organizational

climate the structure of the organization and the organizationrsquos socialization processes as well as by

individual characteristics (Tomer 1990) The concept of social capital has been increasingly used to

represent the ldquogoodwill that is engendered by the fabric of social relations and that can be mobilized to

facilitate actionrdquo (Adler amp Kwon 2002 17) Social capital is correlated with human capital but social ties

are distinct from education or training which have been used to measure human capital (Nahapiet amp

Ghoshal 1998 Blyer amp Coff 2003) Social capital contributes to the organizational context for human

capital and has proven to be a powerful factor explaining organizational performance such as innovation

and inter-firm learning (Gabbay amp Zuckerman 1998 Kraatz 1998) However according to Payne

Moore Griffis and Autry (2011 1) ldquoWhile social capital has been applied at the individual group and

organizational levels of analysis researchers have yet to embrace social capital as a multilevel lens to

better understand management and organizational phenomenardquo

4

More recently the concept of green capital has been offered by Chen (2008) who defines it as the

ldquoemployeesrsquo stocks of knowledge skills capabilities experiences attitude wisdom creativities and

commitments about environmental protection or green innovationrdquo (Chen 2008 275) An extensive

literature has focused on explaining the determinants of organizational engagement beyond the firm to

improve the natural environment through the adoption of environmental practices and standards (Delmas

amp Toffel 2008) Understanding the relationship between the adoption of environmental practices and

financial performance has been the focus of considerable research since the 1970s (Orlitsky Schmidt amp

Rynes 2003 McWilliams amp Siegel 2011) However the literature so far has focused mainly on the

impact of the adoption of environmental practices at the macro level and it has remained unclear exactly

how these practices impact organizational effectiveness employee productivity and green capital per se

Until now mostly anecdotal evidence has been presented to support the argument that greater employee

loyalty and productivity occur at environmentally or socially-responsible firms (Delmas amp Pekovic 2012)

Recent research though shows that intellectual capital related to green innovation or environmental

management has a positive impact on competitive innovation (Chen 2008 Delmas Hoffmann amp Kuss

2011)

While research has defined these different forms of capital and explored their influence on organizational

performance no study to date has combined them Little research exists for example on the value of the

organizational context in the development of human capital Abell Felin and Foss are among those who

suggest that ldquosubstantial attention be paid to explanatory mechanisms that are located at the level of

individual action and (strategic) interactionrdquo (Abell Felin amp Foss 2008 489) Similarly while

circumstantial evidence provided by consultants and managers describes the value of green capital in

enhancing human capital engagement rigorous research is scarce on this issue In this paper we analyze

the direct impact of sources of human social and green types of capital on labor productivity and their

interaction

Scholars have used different measures of organizational performance These include human resource

outcomes (turnover absenteeism job satisfaction) organizational outcomes (productivity quality

service) financial accounting outcomes (ROA profitability) and capital market outcomes (stock price

5

growth returns) (Dyer amp Reeves 1995) According to Dyer and Reeves (1995) human resource strategies

are most likely to directly impact human resource outcomes followed by organizational financial and

capital market outcomes In this paper we focus on organizational outcomes looking more specifically at

labor productivity as a reliable and widely used measure of the effect of human resources on organizational

performance

Samuelson and Nordhaus define labor productivity as ldquototal output divided by labor inputsrdquo (1989 980)

High labor productivity is therefore a desirable outcome Labor productivity measures the extent to which

the human capital is delivering value to the firm A firm that excels in the creation of human capital

resources should have people who are highly productive relative to the competition (Koch amp McGrath

1996 Porter 1985)

The literature has emphasized the role of human skills and human capital on labor productivity Human

capital stock accumulated through training activities is one of the main factors of production (eg Lynch

1994) Investment in human resources has been recognized as a significant source of competitive

advantage since such investments can lead to more effective employees (Porter 1985) One of the key

tools for investing in human resources is training (Jennings Cyr amp Moore 1995) Scholars have argued

that training is profitable as it increases the specificity of human capital assets making it more difficult for

competitors to imitate (Koch amp McGrath 1996) Empirical evidence corroborates this conclusion and

shows that training is positively associated with labor productivity improvement (Dearden Reed amp Van

Reenen 2006 Conti 2005 Zwick 2004 Rennison amp Turcotte 2004 Koch amp McGrath 1996)

In this paper we propose a broader view of human capital management beyond the human resources

department where firms not only provide employees with training to improve their knowledge and skills

but also encourage employees to engage in interpersonal contact with their colleagues and to have a stake

in the success of the organization We argue that employees engaged in these ways will be more

productive in organizations that are open to relations with other firms and that invest in environmental

practices

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

3

higher levels of labor productivity are specifically associated with greater financial participation

interpersonal contact inter-firm partnerships and proactive environmental management practices

Our study seeks to advance intellectual inquiry at the intersection of strategic management and the

management of human capital By describing how interactions among sources of human social and green

forms of capital can influence firm-level outcomes we hope to provide a deeper theoretical and empirical

understanding of human-based organizational performance

LITERATURE REVIEW

Human capital a form of intellectual capital is defined as ldquoa unit level resource that is created from the

emergence of individualrsquos knowledge skills abilities and other characteristicsrdquo (Ployhart amp Moliterno

2011 128) Previous studies have argued that human capital manifests across organizational levels

(Ployhart amp Moliterno 2011) and has a positive influence on competitive advantage (Edvinsson amp

Malone 1997 Johnson 1999 Stewart 1997) Human capital can be at the core of a resource-based

advantage if it is valuable rare and can be kept from rivals (Coff 2002)

However organizational behavior and organizational performance cannot be explained simply in terms of

personal attributes The individualrsquos behavior and performance will be determined by the organizational

climate the structure of the organization and the organizationrsquos socialization processes as well as by

individual characteristics (Tomer 1990) The concept of social capital has been increasingly used to

represent the ldquogoodwill that is engendered by the fabric of social relations and that can be mobilized to

facilitate actionrdquo (Adler amp Kwon 2002 17) Social capital is correlated with human capital but social ties

are distinct from education or training which have been used to measure human capital (Nahapiet amp

Ghoshal 1998 Blyer amp Coff 2003) Social capital contributes to the organizational context for human

capital and has proven to be a powerful factor explaining organizational performance such as innovation

and inter-firm learning (Gabbay amp Zuckerman 1998 Kraatz 1998) However according to Payne

Moore Griffis and Autry (2011 1) ldquoWhile social capital has been applied at the individual group and

organizational levels of analysis researchers have yet to embrace social capital as a multilevel lens to

better understand management and organizational phenomenardquo

4

More recently the concept of green capital has been offered by Chen (2008) who defines it as the

ldquoemployeesrsquo stocks of knowledge skills capabilities experiences attitude wisdom creativities and

commitments about environmental protection or green innovationrdquo (Chen 2008 275) An extensive

literature has focused on explaining the determinants of organizational engagement beyond the firm to

improve the natural environment through the adoption of environmental practices and standards (Delmas

amp Toffel 2008) Understanding the relationship between the adoption of environmental practices and

financial performance has been the focus of considerable research since the 1970s (Orlitsky Schmidt amp

Rynes 2003 McWilliams amp Siegel 2011) However the literature so far has focused mainly on the

impact of the adoption of environmental practices at the macro level and it has remained unclear exactly

how these practices impact organizational effectiveness employee productivity and green capital per se

Until now mostly anecdotal evidence has been presented to support the argument that greater employee

loyalty and productivity occur at environmentally or socially-responsible firms (Delmas amp Pekovic 2012)

Recent research though shows that intellectual capital related to green innovation or environmental

management has a positive impact on competitive innovation (Chen 2008 Delmas Hoffmann amp Kuss

2011)

While research has defined these different forms of capital and explored their influence on organizational

performance no study to date has combined them Little research exists for example on the value of the

organizational context in the development of human capital Abell Felin and Foss are among those who

suggest that ldquosubstantial attention be paid to explanatory mechanisms that are located at the level of

individual action and (strategic) interactionrdquo (Abell Felin amp Foss 2008 489) Similarly while

circumstantial evidence provided by consultants and managers describes the value of green capital in

enhancing human capital engagement rigorous research is scarce on this issue In this paper we analyze

the direct impact of sources of human social and green types of capital on labor productivity and their

interaction

Scholars have used different measures of organizational performance These include human resource

outcomes (turnover absenteeism job satisfaction) organizational outcomes (productivity quality

service) financial accounting outcomes (ROA profitability) and capital market outcomes (stock price

5

growth returns) (Dyer amp Reeves 1995) According to Dyer and Reeves (1995) human resource strategies

are most likely to directly impact human resource outcomes followed by organizational financial and

capital market outcomes In this paper we focus on organizational outcomes looking more specifically at

labor productivity as a reliable and widely used measure of the effect of human resources on organizational

performance

Samuelson and Nordhaus define labor productivity as ldquototal output divided by labor inputsrdquo (1989 980)

High labor productivity is therefore a desirable outcome Labor productivity measures the extent to which

the human capital is delivering value to the firm A firm that excels in the creation of human capital

resources should have people who are highly productive relative to the competition (Koch amp McGrath

1996 Porter 1985)

The literature has emphasized the role of human skills and human capital on labor productivity Human

capital stock accumulated through training activities is one of the main factors of production (eg Lynch

1994) Investment in human resources has been recognized as a significant source of competitive

advantage since such investments can lead to more effective employees (Porter 1985) One of the key

tools for investing in human resources is training (Jennings Cyr amp Moore 1995) Scholars have argued

that training is profitable as it increases the specificity of human capital assets making it more difficult for

competitors to imitate (Koch amp McGrath 1996) Empirical evidence corroborates this conclusion and

shows that training is positively associated with labor productivity improvement (Dearden Reed amp Van

Reenen 2006 Conti 2005 Zwick 2004 Rennison amp Turcotte 2004 Koch amp McGrath 1996)

In this paper we propose a broader view of human capital management beyond the human resources

department where firms not only provide employees with training to improve their knowledge and skills

but also encourage employees to engage in interpersonal contact with their colleagues and to have a stake

in the success of the organization We argue that employees engaged in these ways will be more

productive in organizations that are open to relations with other firms and that invest in environmental

practices

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

4

More recently the concept of green capital has been offered by Chen (2008) who defines it as the

ldquoemployeesrsquo stocks of knowledge skills capabilities experiences attitude wisdom creativities and

commitments about environmental protection or green innovationrdquo (Chen 2008 275) An extensive

literature has focused on explaining the determinants of organizational engagement beyond the firm to

improve the natural environment through the adoption of environmental practices and standards (Delmas

amp Toffel 2008) Understanding the relationship between the adoption of environmental practices and

financial performance has been the focus of considerable research since the 1970s (Orlitsky Schmidt amp

Rynes 2003 McWilliams amp Siegel 2011) However the literature so far has focused mainly on the

impact of the adoption of environmental practices at the macro level and it has remained unclear exactly

how these practices impact organizational effectiveness employee productivity and green capital per se

Until now mostly anecdotal evidence has been presented to support the argument that greater employee

loyalty and productivity occur at environmentally or socially-responsible firms (Delmas amp Pekovic 2012)

Recent research though shows that intellectual capital related to green innovation or environmental

management has a positive impact on competitive innovation (Chen 2008 Delmas Hoffmann amp Kuss

2011)

While research has defined these different forms of capital and explored their influence on organizational

performance no study to date has combined them Little research exists for example on the value of the

organizational context in the development of human capital Abell Felin and Foss are among those who

suggest that ldquosubstantial attention be paid to explanatory mechanisms that are located at the level of

individual action and (strategic) interactionrdquo (Abell Felin amp Foss 2008 489) Similarly while

circumstantial evidence provided by consultants and managers describes the value of green capital in

enhancing human capital engagement rigorous research is scarce on this issue In this paper we analyze

the direct impact of sources of human social and green types of capital on labor productivity and their

interaction

Scholars have used different measures of organizational performance These include human resource

outcomes (turnover absenteeism job satisfaction) organizational outcomes (productivity quality

service) financial accounting outcomes (ROA profitability) and capital market outcomes (stock price

5

growth returns) (Dyer amp Reeves 1995) According to Dyer and Reeves (1995) human resource strategies

are most likely to directly impact human resource outcomes followed by organizational financial and

capital market outcomes In this paper we focus on organizational outcomes looking more specifically at

labor productivity as a reliable and widely used measure of the effect of human resources on organizational

performance

Samuelson and Nordhaus define labor productivity as ldquototal output divided by labor inputsrdquo (1989 980)

High labor productivity is therefore a desirable outcome Labor productivity measures the extent to which

the human capital is delivering value to the firm A firm that excels in the creation of human capital

resources should have people who are highly productive relative to the competition (Koch amp McGrath

1996 Porter 1985)

The literature has emphasized the role of human skills and human capital on labor productivity Human

capital stock accumulated through training activities is one of the main factors of production (eg Lynch

1994) Investment in human resources has been recognized as a significant source of competitive

advantage since such investments can lead to more effective employees (Porter 1985) One of the key

tools for investing in human resources is training (Jennings Cyr amp Moore 1995) Scholars have argued

that training is profitable as it increases the specificity of human capital assets making it more difficult for

competitors to imitate (Koch amp McGrath 1996) Empirical evidence corroborates this conclusion and

shows that training is positively associated with labor productivity improvement (Dearden Reed amp Van

Reenen 2006 Conti 2005 Zwick 2004 Rennison amp Turcotte 2004 Koch amp McGrath 1996)

In this paper we propose a broader view of human capital management beyond the human resources

department where firms not only provide employees with training to improve their knowledge and skills

but also encourage employees to engage in interpersonal contact with their colleagues and to have a stake

in the success of the organization We argue that employees engaged in these ways will be more

productive in organizations that are open to relations with other firms and that invest in environmental

practices

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

5

growth returns) (Dyer amp Reeves 1995) According to Dyer and Reeves (1995) human resource strategies

are most likely to directly impact human resource outcomes followed by organizational financial and

capital market outcomes In this paper we focus on organizational outcomes looking more specifically at

labor productivity as a reliable and widely used measure of the effect of human resources on organizational

performance

Samuelson and Nordhaus define labor productivity as ldquototal output divided by labor inputsrdquo (1989 980)

High labor productivity is therefore a desirable outcome Labor productivity measures the extent to which

the human capital is delivering value to the firm A firm that excels in the creation of human capital

resources should have people who are highly productive relative to the competition (Koch amp McGrath

1996 Porter 1985)

The literature has emphasized the role of human skills and human capital on labor productivity Human

capital stock accumulated through training activities is one of the main factors of production (eg Lynch

1994) Investment in human resources has been recognized as a significant source of competitive

advantage since such investments can lead to more effective employees (Porter 1985) One of the key

tools for investing in human resources is training (Jennings Cyr amp Moore 1995) Scholars have argued

that training is profitable as it increases the specificity of human capital assets making it more difficult for

competitors to imitate (Koch amp McGrath 1996) Empirical evidence corroborates this conclusion and

shows that training is positively associated with labor productivity improvement (Dearden Reed amp Van

Reenen 2006 Conti 2005 Zwick 2004 Rennison amp Turcotte 2004 Koch amp McGrath 1996)

In this paper we propose a broader view of human capital management beyond the human resources

department where firms not only provide employees with training to improve their knowledge and skills

but also encourage employees to engage in interpersonal contact with their colleagues and to have a stake

in the success of the organization We argue that employees engaged in these ways will be more

productive in organizations that are open to relations with other firms and that invest in environmental

practices

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

6

HYPOTHESES

Studying the engaged organization encompasses a wide perspective on human capital that derives from

two main characteristics of the organization First it favors interconnections between employees and with

other organizations These connections support learning and the development of social capital Second the

organization encourages employees to identify with its goals to increase employee commitment to the

organization This is achieved by providing employees with a financial stake in the organization and

helping employees self-identify with the organization through the adoption of sustainable practices In this

way the engaged organization addresses both the cognitive content of human capital (knowledge and

experience) and the non-cognitive content of human capital (values and interests) as defined by Ployhart

and Moliterno (2011)

We capture these characteristics in a framework that includes human capital social capital and green

capital (see Figure 1 below) The framework combines individual level employee characteristics with

organizational level characteristics Our approach includes internal organizational characteristics of firms

as well as firm relations with the competitive and natural environments We describe the elements that

favor employee engagement within the firm and its productivity and we outline how firm engagement

beyond its boundaries supports labor productivity We also describe interactions between internal and

external engagement Our hypotheses are developed below

Insert Figure 1 about here

Human capital engagement through financial participation

Profit sharing schemes provide employees with additional income based on the profitability of the firm

(Florkowski 1987) Scholars have argued that employee financial participation strengthens workers

commitment to the firm reduces the need for costly monitoring and increases work effort (Doucouliagos

1995 Fitzroy amp Kraft 1987 Cable amp Wilson 1989 1990 Wadhwani amp Wall 1990 Kruse 1992) It is

argued that employees when they share in ownership can think and act like owners (Pfeffer 1998)

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

7

becoming more responsible and accountable for organizational outcomes The ldquointrinsicrdquo perspective

suggests that employee ownership increases employee commitment to and satisfaction with the company

and that the benefits of ownership are derived directly from the fact of ownership rather than from factors

in the ownership scheme itself or in the organizational context Other more instrumental perspectives argue

that financial participation allows the employee to be a more significant participant in the organization and

to influence decision-making leading to organizational effectiveness (Coyle-Shapiro Morrow Richardson

amp Dunn 2002) Here we argue that financial participation will facilitate the alignment of employee values

and interests with those of the firm and should amplify the content of human capital such as the

knowledge acquired through training thus resulting in increased labor productivity We therefore

hypothesize the following

Hypothesis 1 Employee financial participation is associated with greater labor productivity

Employee and organization interactions and social capital

Interpersonal relations

In his seminal work Kotter described how effective managers spend more than 80 of their time

interacting with others gathering and sharing information (Kotter 1982) Beyond general management

others have since investigated the importance of interpersonal contacts on employee productivity (Luthans

1988 Greve Benassi amp Arne Dag 2010) There are two main reasons to explain why increased

interpersonal contacts in an organization can lead to improved labor productivity First interpersonal

contacts increase employeesrsquo ldquosocial capitalrdquo defined as the ability to reach others inside and outside the

organization for advice and problem-solving (Greve et al 2010) Such social capital helps employees

engage in knowledge transfer and leads to innovative ideas that improve productivity (Mohrman amp

Novelli 1985 Hamilton Nickerson amp Hideo 2003 Greve et al 2010) It also binds employee together to

amplify knowledge skills and abilities and results in enhanced productivity (Ployhart amp Moliterno 2011)

Second interpersonal contacts can promote employee job satisfaction and motivation which in turn lead to

increased productivity Like any other social activity work entails social needs and responses such as the

need for connection cooperation support and trust (Cohen amp Prusak 2001) Organizations that facilitate

interpersonal contact among their employees provide an enhanced working environment that might lead

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

8

employees to give more to the firm and increase their productivity resulting in overall improved

organizational productivity (Banker Field Schroeder amp Sinha 1996 Batt 2004 Huselid 1995) We

therefore hypothesize the following

Hypothesis 2 Increased interpersonal relations are associated with increased labor productivity

Inter-organizational relations

Inter-organizational relations present shared meaning commitment and norms of reciprocity that enable

understanding and knowledge transfer among various actors (Gulati 1995 Youndt Subramaniam amp

Snell 2004) One of the main reasons that firms participate in inter-organizational relations or partnerships

is to access know-how important information and capabilities belonging to their alliance partners (Kale

Singh amp Perlmutter 2000 Hamel 1991 Khanna Gulati amp Nohria 1998) The interaction between the

individual members of the partner organizations is an effective mechanism to transfer or learn ldquostickyrdquo and

tacit know-how across the organizations (von Hippel 1988 Marsden 1990) Inter-organizational relations

can enhance social capital and provide access to rich and diverse sets of information (Koka amp Prescott

2002) Social capital coming from inter-organizational relationsmdashin a similar fashion to social capital

stemming from intra-firm interpersonal relationsmdashhelps employees engage in knowledge transfer and

leads to innovative ideas that improve productivity We therefore hypothesize the following

Hypothesis 3 Inter-organizational relations are associated with greater labor productivity

Green capital and positive social identity

We define proactive environmental practices and strategies as those that seek to reduce the environmental

impacts of operations beyond regulatory requirements (Sharma 2000) One mechanism that can link the

adoption of proactive environmental practices to labor productivity is the positive social identity that can

be derived from working in a ldquogreenerrdquo firm As Ambec and Lanoie noted ldquoPeople who feel proud of the

company for which they work not only perform better on the job but also become ambassadors for the

company with their friends and relatives enhancing goodwill and leading to a virtuous circle of good

reputationrdquo (Ambec amp Lanoie 2008 57)

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

9

The social identity theory suggests that an employees self-concept is influenced by membership in an

organization (Ashforth amp Mael 1989 Dutton amp Dukerich 1991) According to this theory the employee

would experience a positive self-identity when working in firms with a positive environmental reputation

(Turban amp Greening 1997) Several studies have shown that involvement in social and environmental

causes enhances an organizationrsquos reputation (eg Hess Rogovsky amp Dunfee 2002 Delmas 2002

Delmas amp Montiel 2009) It seems likely then that the adoption of proactive environmental practices by

an organization would lead to a positive organizational reputation and have a positive impact on

employeesrsquo work attitudes

A positive corporate social identity may create a stronger emotional association between employees and

their firm resulting in enhanced labor productivity (Koh amp Boo 2001 Viswesvaran Deshpande amp

Joseph 1998 Hess et al 2002) and increased employee organizational commitment (Dutton Dukerich

amp Harquail 1994 Jones amp Hamilton Volpe 2011 Brammer Millington amp Rayton 2010 Peterson

2004) When employees have a strong positive social identification with their organization their goals and

those of the organization become increasingly integrated (Hall Schneider amp Nygren 1970) and we can

expect significant overall improvement in labor productivity as a result We therefore hypothesize that the

adoption of proactive environmental practices will enhance labor productivity

Hypothesis 4 The adoption of environmental practices is associated with greater labor productivity

The engaged organization

While we have argued that human capital social capital and green capital have a direct impact on labor

productivity we need to consider that these different forms of intellectual capital do not function

independently but synergistically and enhance each other

Financial participation has been described as a way to enhance cooperation among employees The idea is

that employee participation in the profits of the firm will induce workers to internalize the positive

externalities gained from the individual decision and to cooperate in interdependent tasks (Fitzroy amp Kraft

1986 1987) In other words financial participation might motivate employee engagement with other

employees and lead to enhanced inter-organizational relations and social capital

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

10

Scholars have argued that social ties at one level of the organization influence a lower or higher level of the

organization (Moliterno amp Mahony 2010) For example internal social capital has been shown to

strengthen external social capital through for example enhanced supplier relations (Asanuma 1985

Baker 1990 Dore 1983 Gerlach 1992 Helper 1990 Smitka 1991 Uzzi 1997) and inter-firm learning

(Kraatz 1998)

The adoption of proactive environmental practices which enhance green capital has been shown to relate

to other organizational capabilities involving social capital such as knowledge acquisition assimilation

and transformation (Delmas et al 2011) or the adoption of stronger inter-firm relations such as supply

chain partnerships (Delmas amp Montiel 2009) The adoption of environmental practices could also affect

training and inter-firm relations (Khanna amp Anton 2002) For example one of the basic requirements to

adopt the ISO 14000 international management system standard is to provide job-appropriate employee

training and several authors have shown that ISO certification is an important determinant of training

efforts within the organization (Blunch amp Castro 2007 Ramus amp Steger 2000) We therefore hypothesize

that sources of human social and green forms of capital interact with each other

Hypothesis 5 Sources of human social and green capital interact positively to affect labor productivity

The hypothesized relations are described in Figure 2 In addition to the effect of training on labor

productivity we identify the effect of financial participation inter-personal relations inter-organizational

relations and environmental practices on labor productivity as well as the interaction between these sources

of human social and green capital

Insert Figure 2 about here

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

11

METHOD

Data

To test our hypotheses we used data from the French Organizational Changes and Computerizationrsquos

(COI) 2006 survey2 The COI survey is a matched employer-employee dataset on organizational change

and computerization from the National Institute for Statistics and Economic Studies (INSEE) and the

Ministry of Labor and the Center for Labor Studies (CEE) The survey benefited from a high response rate

of 86 and contains 7700 firms that are representative of the population of French firms from all

industries except agriculture forestry and fishing Each firm fills in a self-administered questionnaire about

information technologies and work organizational practices in 2006 and changes that have occurred in

those areas since 2003 as well as the goals driving decisions to implement organizational changes and the

economic context in which those decisions were made Within each surveyed firm employees were

randomly selected and asked about their personal socio-economic characteristics as well as information

about their job and position within the organization The original dataset includes 14369 employees

In order to obtain information on employee value-added activities production sold and employee profit

sharing the COI survey results were merged with two other databases the 2006 Annual Enterprise Survey

(EAE) and the Elaboration of Enterprise Annual Statistics from 2008 (ESANE) The Annual Enterprise

Survey is a mandatory survey conducted by the French Ministry of Industry to collect data on firm

characteristics such as business activities size and location We used a sample comprising 80000

enterprises

Additionally the Annual Statement of Social Data (Deacuteclarations Annuelles de Donneacutees Sociales DADS)

is used to obtain information about wages and working hours It contains administrative documents filled

in by employers and reported to the Social Security and Tax Agencies Some DADS information has been

collected every year since 1950 the current system was first used for declarations relating to 1993 The

DADS processing system provides researchers with a type of ongoing census of employee wages number

2 More details about the design and scope of this survey are available on wwwenquetecoinet Survey COI-TIC 2006-

INSEE-CEETreatments CEE

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

12

of days worked during the course of each year qualifications occupation duration of employment etc

The results are usually available 15 months after the end of the reporting year

In order to obtain information about the adoption of environmental proactive practices we merged the COI

data with The Community Innovation Survey (CIS) The CIS survey was administered by the French

Institute for Statistics and Economic Studies over the period 2006-2008 the survey is based on the OECD

Oslo Manual Firms answered questions regarding innovations they had introduced within the previous

three years The questionnaire was sent to 25000 firms and brought another very high response rate at

81 The CIS survey is mandatory for firms with more with 250 or more employees bringing more

important representation of firms with more than 250 employees As a result of the data merges our

sample includes 5 210 observations for 1 988 firms The average number of respondents per firm is 3

ranging from 1 to 12 We compared our sample with the representative sample from COI based on wages

size and sector covered The only difference stems from size of the firms in our sample which are

significantly larger (plt005)

Measures

Labor Productivity Drawing on prior research (eg Salis amp Williams 2010) we measure labor

productivity as the firmrsquos value added divided by the number of employees Value added was measured in

2008 and is recorded in the ESANE database the number of employees was obtained from the COI

database

Note that the dependent variable was measured in 2008 and the independent variables in 2006 to help

control for reverse causality

Financial Participation The financial participation is a share of firm profit paid to employees We

introduced a variable representing employee financial participation in Euros

Interpersonal Relations To assess the level of interpersonal relations inside the firm we use three

categories The first category working relations is based on the following information employee works

regularly with (1) supervisor (2) subordinates (3) colleagues from the same firm (4) different

departments (5) people outside the firm The second category named working interaction consists of the

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

13

following employee has occasion to discuss different issues with colleagues inside the firm (3) frequently

(2) occasionally (1) never or almost never employee is part of a working group such as a project problem-

solving pilot or brainstorming group employee attends meetings The helping environment category is

based on the following items employee participates in work task distribution (3) often (2) sometimes (1)

never or almost never and employee helps colleagues with work tasks (3) often (2) sometimes (1) never or

almost never We conducted an exploratory principal components factor analysis on these three

interpersonal relations measures The three variables load on one factor explaining 70 of the variance

Inter-organizational Relations To measure inter-organizational relations we created three indicators

customer relation supplier relation and external partner relations The customer relation indicator consists

of the following 8 items (1) the firm uses labeling goods and services (2) the firm is engaged in delivering

or supplying goods or services according to a fixed deadline (3) the firm is engaged in responding to

claims or supplying after-sales service according to a fixed deadline (4) the firm operates a contact or call

center for clients (5) the firm uses integrated IT management of customer relations (6) the firm uses

goods or services catalogues and price lists on a website (7) the firm uses online sales (8) the firm uses

tools for sales via an electronic marketplace The supplier relation indicator includes the following three

items (1) the firm selects suppliers via formal tender (2) the firm has a long term relationship with certain

suppliers (3) the firm contracts with certain suppliers to deliver goods or services according to a fixed

deadline The external partner relation consists of the following three items the firm has established RampD

collaborations with (1) private businesses or laboratories or (2) the Center for National Scientific

Research universities or other public organizations (3) the firm studies client expectations behavior or

satisfaction We ran an exploratory principal components factor analysis on the three inter-organizational

relations measures The three variables load on one factor which explains 68 of the variance

Environmental practices In order to measure a firm adoption of proactive environmental practices we

constructed a variable which consists of the following the firm has adopted innovative practices to (1)

reduce resource andor material per unit of production (2) reduce energy use (3) reduce firmrsquos CO2

lsquofootprintrsquo (total CO2 production) (4) replace materials with less polluting or hazardous substitutes (5)

reduce soil water noise or air pollution (6) recycle waste water or materials

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

14

We also included several control variables

Training Training has often been used as a proxy for human capital (eg Hatch amp Dyer 2004 Skaggs amp

Youndt 2004) Therefore we constructed three specific training indicators customer oriented training

quality oriented training and general oriented training Each training indicator includes the following

components (1) customerqualitygeneral training received (2) year of training received We ran an

exploratory principal components factor analysis on the four measures The three variables load on one

factor which explains 769 of the variance

Size The literature finds that firm size is a significant determinant of labor productivity (eg Zwick 2004

Pfeffer amp Langton 1993) Therefore we include firm size as measured by the number of employees

within the firm

Production The financial strength of the firm leads to productivity improvement (Dearden et al 2006)

We therefore introduce a variable representing the total value of production sold in Euros

Wage Wages are found to have a significant effect on labor productivity (eg Alexander 1993) We

therefore include a variable representing the average wage paid by firms

Working Hours Following previous research (eg Sousa-Poza amp Ziegler 2003) we include a variable

that indicates employee working hours

The variables used in estimation their definitions and sample statistics are presented in Table 1

Insert Table 1 about here

Structural model We employed structural equation modeling (SEM AMOS Version 21 via maximum

likelihood estimates) because of the ability of this technique to analyze models based on several latent

variables and to model and test complex patterns of relationships (Hardy amp Bryman 2004) Structural

modeling addresses structural and measurement issues frequently found in survey-designed research and is

increasingly used in strategic-management research (Capron 1999 Cordano amp Frieze 2000 Delmas amp

Toffel 2008 Delmas et al 2011 Sharma 2000 Shook Ketchen Hult amp Kacmar 2004 Simonin 1999)

The construction of each latent variable can be depicted by a set of linear equations of the form

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

15

ipipii xxY 110

Similarly the relation between the different latent variables can be described with a set of linear equations

of the same form The equations system is solved under the side condition to minimize the overall variance

error Often different letters are used to distinguish between the latent and observable variables For

simplicity and because we focus on the relation between the latent variables only we use a single notation

As such in our case the equations system between our main variables can be described as

LB FP IR IOR EI CON LBLP x x x x x

Where LP presents labor productivity LB reflects a potential systematic deviation from the neutral level

FP reflects the effect of financial participation on labor productivity IR reflects the effect of

interpersonal contacts on labor productivity IOR reflects the effect of inter-organizational partnership on

labor productivity EP reflects the effect of environmental practices on labor productivity CON reflects

the effect of control variables such as training size total production wage and working hours on labor

productivity and finally LP depicts the error in the variance that cannot be explained by any of the

variables

Structural diagnostics Based on a number of tests we found a good overall fit for the model We

calculated the root mean squared error of approximation (RMSEA) an estimate of the discrepancy

between the original and reproduced covariance matrices in the population (Steiger 1990) In our model

the RMSEA of 004 is within an acceptable range (Cudeck amp Browne 1983) Likewise we found an

incremental fit index (IFI) (Bollen 1989) of 095 a Tucker Lewis index (TLI) (Tucker amp Lewis 1973) of

092 and a comparative fit index (CFI) (Bentler amp Bonett 1980) of 095 Each of these indices is above

the common threshold of 090 that designates an acceptable fit In sum these structural diagnostics indicate

a very good relative fit of the theoretical model to the underlying data

RESULTS

The measurement model refers to the construction of latent variables from observable items In our case

we constructed three latent variables from 10 items First we conducted exploratory factor analyses on the

items for each of the potential latent variables that showed suitable loading of each of the items on the

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

16

three factors Second we tested the measurement model by examining individual item reliability internal

consistency and discriminant validity (see Table 2) The measurement model provided acceptable item

reliability all of the item loadings being statistically significant (plt0001)

Insert Table 2 about here

As Table 3 illustrates the results provide significant support for the hypothesized relations There is a

significant positive path between the influence of financial participation and labor productivity ( = 025

plt0001) providing support for hypothesis 13 When financial participation goes up by 1 standard

deviation productivity goes up by 025 standard deviations or 6 of the average productivity Likewise

the significant positive relationship between interpersonal relations and labor productivity ( = 018

plt0001) provides support for Hypothesis 2 When the variable interpersonal relation goes up by 1

standard deviation productivity goes up by 018 standard deviations or 45 of the average productivity

Regarding hypothesis 3 the variable inter-organizational relations is also significant and positive in

predicting labor productivity ( = 011 plt0001) When the variable inter-organizational relations goes up

by 1 standard deviation productivity goes up by 011 standard deviations or about 2 of the average

productivity Finally the variable environmental practices is significant and positive at predicting labor

productivity ( = 008 plt0001) and confirms hypothesis 4 When the environmental practices variable

goes up by 1 standard deviation productivity goes up by 008 standard deviations or about 2 of the

average productivity

Insert Table 3 about here

3 Here we present the standardized regression coefficients

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

17

Hypothesis 5 predicted positive interactions between the independent variables Our results show positive

and significant correlations between financial participation interpersonal relations inter-organizational

relations and environmental practices (plt0001) However there was a slightly lower relationship between

financial participation and training (pgt005)

Controls The variable representing training is positive and significant (pgt005) The variable size is

negative and significant (size = -469 plt0001) indicating that smaller firms tend to be more productive

The variable working hours is positive and significant indicating higher productivity with more working

hours ( = 014 plt0001) However the variable wage is not significant (pgt010)

Alternative models To compare our model to a more classic test of the effect of high work systems on

labor productivity we developed an alternative model in which we included training and financial

participation and omitted the other hypothesized relations (interpersonal relations inter-organizational

relations and environmental practices) In this model the significance of the direct relationship between

training and labor productivity increases ( = 013 plt0001) The significance of financial participation

remains unchanged ( = 027 p lt0001) We also used the nested model comparison procedure to test

whether the inclusion of our variables improve the model The results indicate a significant difference

between the two models and a decrease in the fit indices with the more conventional model (plt0001) In

sum our original model adds significant explanatory power to a more conventional approach

Industry effects In order to account for potential industry differences (Datta et al 2005) we ran the

model for the service and manufacturing sectors separately In our sample we have 2175 observations

from the service sector The results of the service sector analysis yield fit indices and coefficients similar to

those of the main model However the variable training lost its significance (pgt010) and the variable

environmental practices reduced its significance (plt0015) (Appendix A) We also found a reduced

correlation between training and financial participation as well as between interpersonal contacts and

environmental practices (pgt010) In contrast the model for the 3041 manufacturing observations has a

reduced significance for interpersonal relations (pgt01) but an increased significance for the training

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

18

variable ( = 015 plt001) (Appendix B) All the other variables are similar to those of the model with the

full sample4

Robustness To ensure the robustness of our analysis we validated the findings using a number of

alternative approaches First since our data provides information on multiple individuals within each

organization there is the potential for correlation of errors across individuals within each organization We

therefore trimmed our sample and used only a randomly chosen individual respondent per firm in our

estimations There is no significant difference in the results between the two samples except that the

training variable is less significant (plt010) We also averaged the employee level responses and re-run the

analysis There was no difference in this analysis with the main analysis presented in this paper 5 Second

a potential concern derives from heterogeneity within our sample that is not controlled for in our structural

equation model Specifically because our sample includes facilities from several sub-industries and

structural equation modeling techniques do not allow for industry dummies it is possible that unobserved

differences between these industries may account for some of our results To test whether our results were

sensitive to unobserved industry differences we estimated regression equations corresponding to the paths

of the structural equations The results of these regression analyses confirmed the findings of the structural

model All hypothesized relations remain statistically significant (plt0001) with the predicted sign6

In summary we find that financial participation interpersonal relations inter-organizational relations and

environmental practices have a positive and significant impact on labor productivity In addition we find a

significant correlation between these variables with the exception of financial participation

DISCUSSION

Our findings show that labor productivity is increased in an open organizational context where human

capital interacts with social and green forms of capital We argue that such interaction facilitates the

development of both employee knowledge and experience as well as favors the alignment of employee

values and interests Our results show that our full model that integrates the sources of human capital

4 Analyses at a more refined sectoral level yield unsatisfactory fit indices due to the lower number of observations and

are not reported 5 Results available from the authors

6 Results available upon request from the authors

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

19

social and green capital yield superior significance as compared to a more limited model of human capital

management

Analysis of the engaged organization is enriched but also complicated by the need to consider multiple

levels of analysis Inter-organizational relations and the adoption of environmental practices occur at the

firm level However as our model confirms an understanding of the way such practices lead to firm level

performance must incorporate constructs at the level of the individual and relations among individuals

These findings support the idea that there is a need to modify the scope and nature of human capital

management processes to include a broader firm perspective Our study contributes to both the human

resource and strategy literature by bringing both individual and firm level perspectives together

Our findings have important managerial implications They indicate interdependencies among multiple

levels of strategy that firms can learn how to manage Our analysis also points out a potential enhanced

role for human resources in advancing sustainability Currently only a small percentage of human resource

departments are responsible for creating sustainability strategy (SHRM 2011) Sustainability is still within

the purview of corporate strategy health and safety andor the regulatory departments However a better

integration of sustainability issues in the fabric of the organization can enhance employee engagement and

productivity

Critics of this approach might be concerned that employees in engaged organizations are more likely to

find jobs somewhere else leading to a higher voluntary turnover (Dess amp Saw 2001) However as we

argued in engaged organizations interpersonal and inter-organizational ties that could facilitate voluntary

turnover are combined with systems to encourage employee social identification and align employeersquos

interests with the goals of the organization This combination should facilitate employee commitment to

the organization and limit employee voluntary departure This is consistent with Kale et al (2000) who

provide empirical evidence that social capital based on mutual trust and interaction at the individual level

between alliance partners creates a basis for learning and know-how transfer across the exchange interface

This curbs opportunistic behavior by alliance partners thus preventing the leakage of critical know-how

The benefits of the engaged organization are more likely to be felt by an organization reliant on knowledge

management and operating in dynamic contexts Indeed such environments are more likely to benefit from

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

20

flexible human resources who can adapt to changing requirements (Wright amp Snell 1998) Employees in

engaged organizations who benefit from ties with other organizations should be more responsive than

those who work in more recluse organizations Organizations that operate in more stable environments

may experience fewer benefits Our results indicate for instance that interpersonal relations are less

significant and that training is more significant in manufacturing as compared to the whole sample

Interestingly the adoption of proactive environmental practices remains a strong predictor of labor

productivity in both the service and manufacturing contexts This raises the question of which

configuration of human social and green capital is the most effective and in what context Further research

could use such a configurational approach (Wright amp McMahan 1992)

We also contribute to the literature on social capital by empirically testing cross-level relations between

individual level social capital and outcomes at the collective level Although most theoretical models of

social capital incorporate cross-level relations between individual level social capital and outcomes at the

collective level very few articles have examined cross-level relations empirically (Moliterno amp Mahony

2010 Payne et al 2011) To represent social capital we adopted Adler and Kwonrsquos (2002) notion of

internal and external ties and more specifically individualinternal (interpersonal relations within the firm)

and collectiveexternal (inter-organizational relations) Further research could look at other types of social

capital such as collectiveinternal and individualexternal We also measured sources of social capital

rather than actual social capital

Our results show that our training variable used conventionally to assess human capital loses some

significance in some of our analyses It is possible that other factors might be more relevant to measure as

a source of human capital Further research should identify if other human resource practices such as

rewards or performance appraisal have a more significant effect than training when included in our model

Our research is not without limitations First our analysis was limited to the French context and we were

limited in identifying specific external market and regulatory conditions Since scholars have identified

international institutional differences regarding the implementation of environmental practices future

research could explore similar questions using a contingency approach in an international setting (Aragon-

Correa amp Sharma 2003 Delmas amp Montes-Sancho 2011) Second our analysis studies the existence of

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

21

interdependence of different forms of intellectual capital rather than causality links between these Further

research could undertake a dynamic analysis to understand the steps of the development of the engaged

organization It is possible for example that some organizations start with environmental innovation while

others begin opening their organization through inter-organizational relations Further research could also

investigate how the characteristics of the engaged organization influence other organizational performance

variables such as voluntary turnover innovation or profit

REFERENCES

Abell P Felin T amp Foss N 2008 Building microfoundations for the routines capabilities and

performance links Managerial and Decision Economics 29 489ndash502

Adler P amp Kwon S 2002 Social Capital Prospects for a New Concept Academy of Management

Review 27(1) 17-40

Alexander C 1993 The changing relationship between productivity wages and unemployment in the

UK Oxford Bulletin of Economics and Statistics 55(1) 87-102

Ambec S amp Lanoie P 2008 When and Why Does It Pay To Be Green Academy of Management

Perspective 23 45-62

Aragon-Correa J A amp Sharma S 2003 A contingent re source-based view of proactive corporate

environmental strategy Academy of Management Review 28 71ndash 88

Asanuma B 1985 The organization of parts purchases in the Japanese automotive industry Japanese

Economic Studies 13 32 -78

Ashforth BE amp Mael F 1989 Social identity theory and organization Academy of Management

Review 14 20ndash39

Baker W 1990 Market networks and corporate behavior American Journal of Sociology 96 589-625

Banker RE Field JM Schroeder RG amp Sinha K K 1996 Impact of Work Teams on

Manufacturing Performance A Longitudinal Field Study Academy of Management Journal

39(4) 867ndash890

Batt R 2004 Who benefits from teams Comparing workers supervisors and managers Industrial

Relations 43(1) 183ndash212

Bentler PM amp Bonett DG 1980 Significance Tests and Goodness of Fit in the Analysis of

Covariance-Structures Psychological Bulletin 88 588-606

Blunch N-H amp Castro P 2007 Enterprise-level training in developing countries do international

standards matter International Journal of Training and Development 11(4) 314-324

Blyer M amp Coff R 2003 Dynamic capabilities social capital and rend appropriation ties that split ties

Strategic Management Journal 24 677-686

Brammer S Millington A amp Rayton B 2010 The contribution of corporate social responsibility to

organizational commitment The International Journal of Human Resource Management 18(10)

701-1719

Cable J amp Wilson N 1989 Profit sharing and productivity An analysis of UK engineering companies

Economic Journal 99 366ndash375

Cable J amp Wilson N 1990 Profit sharing and productivity some further evidence Economic Journal

100 550ndash555

22

Capron L 1999 The long-term performance of horizontal acquisitions Strategic Management Journal

20 987-1018

Chen YS 2008 The positive effect of green intellectual capital on competitive advantages of firms

Journal of Business Ethics 77 271-286

Coff R W 2002 Human capital shared expertise and the likelihood of impasse in corporate acquisitions

Journal of Management 28(1) 107ndash128

Cohen D amp Prusak L 2001 In Good Company How social capital makes organisations Work Boston

Harvard Business School Press

Conti G 2005 Training productivity and wages in Italy Labor Economics 12 557-576

Cordano M amp Frieze IH 2000 Pollution reduction preferences of US environmental managers

Applying Ajzens theory of planned behavior Academy of Management Journal 43 627-641

Coyle-Shapiro JA-M Morrow PC Richardson R amp Dunn SR 2002 Using Profit Sharing to

Enhance Employee Attitudes A Longitudinal Examination of the Effects on Trust and

Commitment Human Resource Management 41 423ndash39

Cudeck R amp Browne MW 1983 Cross-Validation of Covariance-Structures Multivariate Behavioral

Research 18147-168

Datta DK Guthrie JP amp Wright PM 2005 Human resource management and labor productivity

does industry matter Academy of Management Journal 48(1) 135ndash145

Dearden L Reed H amp Van Reenen J 2006 The Impact of Training on Productivity and Wages

Evidence from British Panel Data Oxford Bulletin of Economics and Statistics 68 397-421

Delmas M amp Pekovic S 2012 Environmental Standards and Labor Productivity Understanding the

mechanisms that sustain sustainability Journal of Organizational Behavior DOI

101002job1827

Delmas M 2002 The Diffusion of Environmental Management Standards in Europe and in the United

States an institutional perspective Policy Sciences 35(1) 91-119

Delmas M amp Montes-Sancho M 2011 An Institutional Perspective on the Diffusion of International

Management System Standards the Case of the Environmental Management Standard ISO

14001 Business Ethics Quarterly 21(1) 103-132

Delmas M Hoffmann V H amp Kuss M 2011 Under the Tip of the Iceberg Absorptive capacity

environmental strategy and competitive advantage Business amp Society 50 116-154

Delmas MA amp Toffel MW 2008 Organizational responses to environmental demands Opening the

black box Strategic Management Journal 291027-1055

Delmas M amp Montiel I 2009 Greening the Supply Chain When is Customer Pressure Effective

Journal of Economics and Management Strategy 18(1) 171-201

Dess GG amp Shaw JD 2001 Voluntary turnover social capital and organizational performance

Academy of Management Review 26 446ndash456

Dore R 1983 Goodwill and the spirit of market capitalism British Journal of Sociology 34 459-482

Doucouliagos C 1995 Worker Participation and Productivity in Labor-Managed and Participatory

Capitalist Firms A Meta-Analysis Industrial and Labor Relations Review 49(1) 58-78

Dowell G Hart S amp Yeung B 2000 Do corporate global environmental standards create or destroy

market value Management Science 46 1059-1074

Dutton J E amp Dukerich J M 1991 Keeping an eye on the mirror image and identity in organisational

adaptation Academy of Management Journal 34 517ndash554

Dutton JE Dukerich JM amp Harquail CV 1994 Organizational images and member identification

Administrative Science Quarterly 39 239-263

23

Dyer L amp Reeves T 1995 HR strategies and form performance what do we know and where do we

need to go International Journal of Human Resource Management 6(3) 656-670

Edvinsson L amp Malone MS 1997 Intellectual Capital New York Collins

Fitzroy F R amp Kraft K 1987 Cooperation productivity and profit sharing Quarterly Journal of

Economics 102(1) 23-35

Fitzroy F R amp Kraft K 1986 Profitability and Profit-Sharing Journal of Industrial Economics 35(2)

113-130

Florkowski GW 1987 The Organizational Impact of Profit Sharing The Academy of Management

Review 12 622-636

Gabbay S M amp Zuckerman EW 1998 Social Capital and opportunity in corporate RampD The

contingent effect of contact density on mobility expectations Social Science Research 27 189-

217

Gerlach ML 1992 Alliance capitalism The social organization of Japanese business Berkeley

University of California Press

Greve A Benassi M amp Arne Dag S 2010 Exploring the contributions of human and social capital to

performance International Review of Sociology 20(1) 35-5

Gulati R 1995 Social Structure and Alliance Formation Patterns A Longitudinal Analysis

Administrative Science Quarterly 40619-652

Gulati R 1998 Alliances and networks Strategic Management Journal 19 293ndash317

Hall DT Schneider B amp Nygren HT 1970 Personal factors in organizational identification

Administrative Science Quarterly 15 176-190

Hamel G 1991 Competition for competence and inter-partner learning within international strategic

alliances Strategic Management Journal Summer Special Issue 12 83ndash103

Hamilton B H Nickerson J A amp Hideo O 2003 Team Incentives and Worker Heterogeneity An

Empirical Analysis of the Impact of Teams on Productivity and Participation Journal of Political

Economy 111(3) 465-497

Hardy MA amp Bryman A 2004 Handbook of data analysis SAGE London Thousand Oaks Calif

Hatch NW amp Dyer J H 2004 Human capital and learning as a source of sustainable competitive

advantage Strategic Management Journal 251155-1178

Helper S 1990 Comparative supplier relations in the US and Japanese auto industries An exit voice

approach Business Economic History 19 153-162

Hess D Rogovsky N amp Dunfee T 2002 The next wave of corporate community involvement

corporate social initiatives California Management Review 44(2) 110-125

Huselid MA 1995 The impact of human resource management practices on turnover productivity and

corporate financial performance Academy of Management Journal 38 635-672

Jackson S E Renwick D W S Jabbour C J C amp Muller-Camen M 2011 State-of-the-art and

future directions for green human resource management Introduction to the special issue

Zeitschrift fuumlr Personalforschung (German Journal of Research in Human Resource

Management) 25 (2) 99-116

Jennings PD Cyr D amp Moore L F 1995 Human resource management on the Pacific Rim An

integration In L F Moore and P D Jennings (Eds) Human resource management on the

Pacific Rim Institutions practices and attitudes 351-379 Berlin de Gruyter

Johnson WHA 1999 An integrative taxonomy of intellectual capital Measuring the stock and flow of

intellectual capital components in the firm International Journal of Technology Management

18(5-8) 562-575

24

Jones C amp Hamilton Volpe E 2011 Organizational identification Extending our understanding of

social identities through social networks Journal of Organizational Behavior 32 413-434

Kale P Singh H amp Perlmutter H 2000 Learning and protection of proprietary assets in strategic

alliances Building relational capital Strategic Management Journal 21 217-237

Khanna M amp Anton WR 2002 Corporate Environmental Management Regulatory and Market-based

Incentives Land Economics 78(4) 539-558

Khanna T Gulati R amp Nohria N 1998 The dynamics of learning alliances competition cooperation

and relative scope Strategic Management Journal 19(3)193ndash210

Koch MJ amp McGrath RG 1996 Improving Labour Productivity Human Resource Management

Policies Do Matter Strategic Management Journal 17 335ndash54

Koh HC amp Boo EHY 2001 The link between organizational ethics and job satisfaction a study of

managers in Singapore Journal of Business Ethics 29 309-24

Koka BR amp Prescott JE 2002 Strategic alliances as social capital A multidimensional view Strategic

Management Journal 23(9) 795-816

Kotter JE 1982 The General Management New York Free Press

Kraatz M S 1998 Learning by association Inter organizational networks and adaptation to

environmental change Academy of Management Journal 41 621-643

Kruse D L 1992 Profit-Sharing and Productivity Microeconomic Evidence from the United States

Economic Journal 102 24ndash36

Luthans F 1988 Successful vs Effective Real Managers The Academy of Management Executive 2(2)

127-132

Lynch LM 1994 Training and the Private Sector NBER Comparative Labor Market Series Chicago

and London University of Chicago Press

Marsden P V 1990 Network Data and Measurement Annual Review of Sociology 16 435-463

McWilliams A amp Siegel D S 2011 Creating and Capturing Value Strategic Corporate Social

Responsibility Resource-Based Theory and Sustainable Competitive Advantage Journal of

Management 37(5) 1480-14-95

Mohrman SA amp Novelli L Jr 1985 Beyond testimonials learning from a quality circles program

Journal of Occupational Behavior 6 93-110

Moliterno TP amp Mahony DM 2010 Network theory of organization A multilevel approach Journal

of Management 37 443-467

Mowery D C Oxley J E amp Silverman B S 1996 Strategic alliances and interfirm knowledge

transfer Strategic Management Journal 17 77-91

Nahapiet J amp Ghoshal S 1998 Social capital intellectual capital and the organization advantage

Academy of Management Review 23 242ndash266

Orlitsky M Schmidt F amp Rynes S 2003 Corporate social and financial performance A meta analysis

Organization Studies 24 403-441

Payne GT Moore CB Griffis SE amp Autry CW 2011 Multilevel challenges and opportunities in

social capital research Journal of Management 37(2) 491ndash520

Peterson DK 2004 The Relationship between Perceptions of Corporate Citizenship and Organizational

Commitment Business amp Society 43 296-319

Pfeffer J 1998 Seven Practices of Successful Organizations California Management Review 40 96ndash

124

25

Pfeffer J amp Langton N 1993 The Effect of Wage Dispersion on Satisfaction Productivity and Working

Collaboratively Evidence from College and University Faculty Administrative Science

Quarterly 38 382-407

Ployhart R E amp Moliterno T P 2011 Emergence of the human capital resource A multilevel model

Academy of Management Review 36(1) 127-150

Porter M 1985 Competitive Advantage New York Free Press

Ramus CA amp Steger U 2000 The roles of supervisory behaviors and environmental policy in

employee lsquoecoinitiativesrsquo at leadingedge European companies Academy of Management Journal

43 605-626

Rennison LW amp Turcotte J 2004 Productivity and Wages Measuring the Effect of Human Capital and

Technology use from Linked Employer-Employee Data Working paper Department of Finance

Economic and Fiscal Policy Branch Canada No 2004ndash01

Russo M V amp Fouts PA 1997 A Resource-based Perspective on Corporate Environmental

Performance and Profitability Academy of Management Journal 40(3) 534-59

Salis S amp Williams AM 2010 Knowledge Sharing Through Face-to-Face Communication and Labor

Productivity Evidence from British Workplaces British Journal of Industrial Relations 48 436-

459

Samuelson P A amp Nordhaus WD 1989 Economics (13th ed) New York McGraw-Hill

Sharma S 2000 Managerial interpretations and organizational context as predictors of corporate choice of

environmental strategy Academy of Management Journal 43(4) 681-697

Shook CL Ketchen DJ Hult GTM amp Kacmar KM 2004 An assessment of the use of structural

equation modeling in strategic management research Strategic Management Journal 25 397-

404

SHRM 2011 Advancing sustainability HRrsquos role A research report by the Society for Human Resource

Management BSR and Aurosoorya

httpwwwshrmorgresearchsurveyfindingsarticlespagesadvancingsustainabilityhrE280

99sroleaspx

Simonin BL 1999 Ambiguity and the process of knowledge transfer in strategic alliances Strategic

Management Journal 20595-623

Skaggs BC amp Youndt MA 2004 Strategic positioning human capital and performance in service

organisations A customer interaction approach Strategic Management Journal 2585-99

Smitka M 1991 Competitive ties Subcontracting in the Japanese automotive industry New York

Columbia University Press

Sousa-Poza A amp Ziegler A 2003 Asymmetric information about workers productivity as a cause for

inefficient long working hours Labour Economics 10 727-747

Steiger JH 1990 Structural Model Evaluation and Modification ndash an Interval Estimation Approach

Multivariate Behavioral Research 25173-180

Stewart TA 1997 Intellectual capital The new wealth of organization New York Bantam Doubleday

Dell Publishing Group Inc

Tomer J F 1990 Developing world class organization Investing in organizational capital Technovation

10(4) 253ndash263

Tucker LR amp Lewis C 1973 Reliability Coefficient for Maximum Likelihood Factor-Analysis

Psychometrika 381-10

Turban DB amp Greening DW 1997 Corporate social performance and organizational attractiveness to

prospective employees Academy of Management Journal 40 658-672

23

Dyer L amp Reeves T 1995 HR strategies and form performance what do we know and where do we

need to go International Journal of Human Resource Management 6(3) 656-670

Edvinsson L amp Malone MS 1997 Intellectual Capital New York Collins

Fitzroy F R amp Kraft K 1987 Cooperation productivity and profit sharing Quarterly Journal of

Economics 102(1) 23-35

Fitzroy F R amp Kraft K 1986 Profitability and Profit-Sharing Journal of Industrial Economics 35(2)

113-130

Florkowski GW 1987 The Organizational Impact of Profit Sharing The Academy of Management

Review 12 622-636

Gabbay S M amp Zuckerman EW 1998 Social Capital and opportunity in corporate RampD The

contingent effect of contact density on mobility expectations Social Science Research 27 189-

217

Gerlach ML 1992 Alliance capitalism The social organization of Japanese business Berkeley

University of California Press

Greve A Benassi M amp Arne Dag S 2010 Exploring the contributions of human and social capital to

performance International Review of Sociology 20(1) 35-5

Gulati R 1995 Social Structure and Alliance Formation Patterns A Longitudinal Analysis

Administrative Science Quarterly 40619-652

Gulati R 1998 Alliances and networks Strategic Management Journal 19 293ndash317

Hall DT Schneider B amp Nygren HT 1970 Personal factors in organizational identification

Administrative Science Quarterly 15 176-190

Hamel G 1991 Competition for competence and inter-partner learning within international strategic

alliances Strategic Management Journal Summer Special Issue 12 83ndash103

Hamilton B H Nickerson J A amp Hideo O 2003 Team Incentives and Worker Heterogeneity An

Empirical Analysis of the Impact of Teams on Productivity and Participation Journal of Political

Economy 111(3) 465-497

Hardy MA amp Bryman A 2004 Handbook of data analysis SAGE London Thousand Oaks Calif

Hatch NW amp Dyer J H 2004 Human capital and learning as a source of sustainable competitive

advantage Strategic Management Journal 251155-1178

Helper S 1990 Comparative supplier relations in the US and Japanese auto industries An exit voice

approach Business Economic History 19 153-162

Hess D Rogovsky N amp Dunfee T 2002 The next wave of corporate community involvement

corporate social initiatives California Management Review 44(2) 110-125

Huselid MA 1995 The impact of human resource management practices on turnover productivity and

corporate financial performance Academy of Management Journal 38 635-672

Jackson S E Renwick D W S Jabbour C J C amp Muller-Camen M 2011 State-of-the-art and

future directions for green human resource management Introduction to the special issue

Zeitschrift fuumlr Personalforschung (German Journal of Research in Human Resource

Management) 25 (2) 99-116

Jennings PD Cyr D amp Moore L F 1995 Human resource management on the Pacific Rim An

integration In L F Moore and P D Jennings (Eds) Human resource management on the

Pacific Rim Institutions practices and attitudes 351-379 Berlin de Gruyter

Johnson WHA 1999 An integrative taxonomy of intellectual capital Measuring the stock and flow of

intellectual capital components in the firm International Journal of Technology Management

18(5-8) 562-575

24

Jones C amp Hamilton Volpe E 2011 Organizational identification Extending our understanding of

social identities through social networks Journal of Organizational Behavior 32 413-434

Kale P Singh H amp Perlmutter H 2000 Learning and protection of proprietary assets in strategic

alliances Building relational capital Strategic Management Journal 21 217-237

Khanna M amp Anton WR 2002 Corporate Environmental Management Regulatory and Market-based

Incentives Land Economics 78(4) 539-558

Khanna T Gulati R amp Nohria N 1998 The dynamics of learning alliances competition cooperation

and relative scope Strategic Management Journal 19(3)193ndash210

Koch MJ amp McGrath RG 1996 Improving Labour Productivity Human Resource Management

Policies Do Matter Strategic Management Journal 17 335ndash54

Koh HC amp Boo EHY 2001 The link between organizational ethics and job satisfaction a study of

managers in Singapore Journal of Business Ethics 29 309-24

Koka BR amp Prescott JE 2002 Strategic alliances as social capital A multidimensional view Strategic

Management Journal 23(9) 795-816

Kotter JE 1982 The General Management New York Free Press

Kraatz M S 1998 Learning by association Inter organizational networks and adaptation to

environmental change Academy of Management Journal 41 621-643

Kruse D L 1992 Profit-Sharing and Productivity Microeconomic Evidence from the United States

Economic Journal 102 24ndash36

Luthans F 1988 Successful vs Effective Real Managers The Academy of Management Executive 2(2)

127-132

Lynch LM 1994 Training and the Private Sector NBER Comparative Labor Market Series Chicago

and London University of Chicago Press

Marsden P V 1990 Network Data and Measurement Annual Review of Sociology 16 435-463

McWilliams A amp Siegel D S 2011 Creating and Capturing Value Strategic Corporate Social

Responsibility Resource-Based Theory and Sustainable Competitive Advantage Journal of

Management 37(5) 1480-14-95

Mohrman SA amp Novelli L Jr 1985 Beyond testimonials learning from a quality circles program

Journal of Occupational Behavior 6 93-110

Moliterno TP amp Mahony DM 2010 Network theory of organization A multilevel approach Journal

of Management 37 443-467

Mowery D C Oxley J E amp Silverman B S 1996 Strategic alliances and interfirm knowledge

transfer Strategic Management Journal 17 77-91

Nahapiet J amp Ghoshal S 1998 Social capital intellectual capital and the organization advantage

Academy of Management Review 23 242ndash266

Orlitsky M Schmidt F amp Rynes S 2003 Corporate social and financial performance A meta analysis

Organization Studies 24 403-441

Payne GT Moore CB Griffis SE amp Autry CW 2011 Multilevel challenges and opportunities in

social capital research Journal of Management 37(2) 491ndash520

Peterson DK 2004 The Relationship between Perceptions of Corporate Citizenship and Organizational

Commitment Business amp Society 43 296-319

Pfeffer J 1998 Seven Practices of Successful Organizations California Management Review 40 96ndash

124

25

Pfeffer J amp Langton N 1993 The Effect of Wage Dispersion on Satisfaction Productivity and Working

Collaboratively Evidence from College and University Faculty Administrative Science

Quarterly 38 382-407

Ployhart R E amp Moliterno T P 2011 Emergence of the human capital resource A multilevel model

Academy of Management Review 36(1) 127-150

Porter M 1985 Competitive Advantage New York Free Press

Ramus CA amp Steger U 2000 The roles of supervisory behaviors and environmental policy in

employee lsquoecoinitiativesrsquo at leadingedge European companies Academy of Management Journal

43 605-626

Rennison LW amp Turcotte J 2004 Productivity and Wages Measuring the Effect of Human Capital and

Technology use from Linked Employer-Employee Data Working paper Department of Finance

Economic and Fiscal Policy Branch Canada No 2004ndash01

Russo M V amp Fouts PA 1997 A Resource-based Perspective on Corporate Environmental

Performance and Profitability Academy of Management Journal 40(3) 534-59

Salis S amp Williams AM 2010 Knowledge Sharing Through Face-to-Face Communication and Labor

Productivity Evidence from British Workplaces British Journal of Industrial Relations 48 436-

459

Samuelson P A amp Nordhaus WD 1989 Economics (13th ed) New York McGraw-Hill

Sharma S 2000 Managerial interpretations and organizational context as predictors of corporate choice of

environmental strategy Academy of Management Journal 43(4) 681-697

Shook CL Ketchen DJ Hult GTM amp Kacmar KM 2004 An assessment of the use of structural

equation modeling in strategic management research Strategic Management Journal 25 397-

404

SHRM 2011 Advancing sustainability HRrsquos role A research report by the Society for Human Resource

Management BSR and Aurosoorya

httpwwwshrmorgresearchsurveyfindingsarticlespagesadvancingsustainabilityhrE280

99sroleaspx

Simonin BL 1999 Ambiguity and the process of knowledge transfer in strategic alliances Strategic

Management Journal 20595-623

Skaggs BC amp Youndt MA 2004 Strategic positioning human capital and performance in service

organisations A customer interaction approach Strategic Management Journal 2585-99

Smitka M 1991 Competitive ties Subcontracting in the Japanese automotive industry New York

Columbia University Press

Sousa-Poza A amp Ziegler A 2003 Asymmetric information about workers productivity as a cause for

inefficient long working hours Labour Economics 10 727-747

Steiger JH 1990 Structural Model Evaluation and Modification ndash an Interval Estimation Approach

Multivariate Behavioral Research 25173-180

Stewart TA 1997 Intellectual capital The new wealth of organization New York Bantam Doubleday

Dell Publishing Group Inc

Tomer J F 1990 Developing world class organization Investing in organizational capital Technovation

10(4) 253ndash263

Tucker LR amp Lewis C 1973 Reliability Coefficient for Maximum Likelihood Factor-Analysis

Psychometrika 381-10

Turban DB amp Greening DW 1997 Corporate social performance and organizational attractiveness to

prospective employees Academy of Management Journal 40 658-672

24

Jones C amp Hamilton Volpe E 2011 Organizational identification Extending our understanding of

social identities through social networks Journal of Organizational Behavior 32 413-434

Kale P Singh H amp Perlmutter H 2000 Learning and protection of proprietary assets in strategic

alliances Building relational capital Strategic Management Journal 21 217-237

Khanna M amp Anton WR 2002 Corporate Environmental Management Regulatory and Market-based

Incentives Land Economics 78(4) 539-558

Khanna T Gulati R amp Nohria N 1998 The dynamics of learning alliances competition cooperation

and relative scope Strategic Management Journal 19(3)193ndash210

Koch MJ amp McGrath RG 1996 Improving Labour Productivity Human Resource Management

Policies Do Matter Strategic Management Journal 17 335ndash54

Koh HC amp Boo EHY 2001 The link between organizational ethics and job satisfaction a study of

managers in Singapore Journal of Business Ethics 29 309-24

Koka BR amp Prescott JE 2002 Strategic alliances as social capital A multidimensional view Strategic

Management Journal 23(9) 795-816

Kotter JE 1982 The General Management New York Free Press

Kraatz M S 1998 Learning by association Inter organizational networks and adaptation to

environmental change Academy of Management Journal 41 621-643

Kruse D L 1992 Profit-Sharing and Productivity Microeconomic Evidence from the United States

Economic Journal 102 24ndash36

Luthans F 1988 Successful vs Effective Real Managers The Academy of Management Executive 2(2)

127-132

Lynch LM 1994 Training and the Private Sector NBER Comparative Labor Market Series Chicago

and London University of Chicago Press

Marsden P V 1990 Network Data and Measurement Annual Review of Sociology 16 435-463

McWilliams A amp Siegel D S 2011 Creating and Capturing Value Strategic Corporate Social

Responsibility Resource-Based Theory and Sustainable Competitive Advantage Journal of

Management 37(5) 1480-14-95

Mohrman SA amp Novelli L Jr 1985 Beyond testimonials learning from a quality circles program

Journal of Occupational Behavior 6 93-110

Moliterno TP amp Mahony DM 2010 Network theory of organization A multilevel approach Journal

of Management 37 443-467

Mowery D C Oxley J E amp Silverman B S 1996 Strategic alliances and interfirm knowledge

transfer Strategic Management Journal 17 77-91

Nahapiet J amp Ghoshal S 1998 Social capital intellectual capital and the organization advantage

Academy of Management Review 23 242ndash266

Orlitsky M Schmidt F amp Rynes S 2003 Corporate social and financial performance A meta analysis

Organization Studies 24 403-441

Payne GT Moore CB Griffis SE amp Autry CW 2011 Multilevel challenges and opportunities in

social capital research Journal of Management 37(2) 491ndash520

Peterson DK 2004 The Relationship between Perceptions of Corporate Citizenship and Organizational

Commitment Business amp Society 43 296-319

Pfeffer J 1998 Seven Practices of Successful Organizations California Management Review 40 96ndash

124

25

Pfeffer J amp Langton N 1993 The Effect of Wage Dispersion on Satisfaction Productivity and Working

Collaboratively Evidence from College and University Faculty Administrative Science

Quarterly 38 382-407

Ployhart R E amp Moliterno T P 2011 Emergence of the human capital resource A multilevel model

Academy of Management Review 36(1) 127-150

Porter M 1985 Competitive Advantage New York Free Press

Ramus CA amp Steger U 2000 The roles of supervisory behaviors and environmental policy in

employee lsquoecoinitiativesrsquo at leadingedge European companies Academy of Management Journal

43 605-626

Rennison LW amp Turcotte J 2004 Productivity and Wages Measuring the Effect of Human Capital and

Technology use from Linked Employer-Employee Data Working paper Department of Finance

Economic and Fiscal Policy Branch Canada No 2004ndash01

Russo M V amp Fouts PA 1997 A Resource-based Perspective on Corporate Environmental

Performance and Profitability Academy of Management Journal 40(3) 534-59

Salis S amp Williams AM 2010 Knowledge Sharing Through Face-to-Face Communication and Labor

Productivity Evidence from British Workplaces British Journal of Industrial Relations 48 436-

459

Samuelson P A amp Nordhaus WD 1989 Economics (13th ed) New York McGraw-Hill

Sharma S 2000 Managerial interpretations and organizational context as predictors of corporate choice of

environmental strategy Academy of Management Journal 43(4) 681-697

Shook CL Ketchen DJ Hult GTM amp Kacmar KM 2004 An assessment of the use of structural

equation modeling in strategic management research Strategic Management Journal 25 397-

404

SHRM 2011 Advancing sustainability HRrsquos role A research report by the Society for Human Resource

Management BSR and Aurosoorya

httpwwwshrmorgresearchsurveyfindingsarticlespagesadvancingsustainabilityhrE280

99sroleaspx

Simonin BL 1999 Ambiguity and the process of knowledge transfer in strategic alliances Strategic

Management Journal 20595-623

Skaggs BC amp Youndt MA 2004 Strategic positioning human capital and performance in service

organisations A customer interaction approach Strategic Management Journal 2585-99

Smitka M 1991 Competitive ties Subcontracting in the Japanese automotive industry New York

Columbia University Press

Sousa-Poza A amp Ziegler A 2003 Asymmetric information about workers productivity as a cause for

inefficient long working hours Labour Economics 10 727-747

Steiger JH 1990 Structural Model Evaluation and Modification ndash an Interval Estimation Approach

Multivariate Behavioral Research 25173-180

Stewart TA 1997 Intellectual capital The new wealth of organization New York Bantam Doubleday

Dell Publishing Group Inc

Tomer J F 1990 Developing world class organization Investing in organizational capital Technovation

10(4) 253ndash263

Tucker LR amp Lewis C 1973 Reliability Coefficient for Maximum Likelihood Factor-Analysis

Psychometrika 381-10

Turban DB amp Greening DW 1997 Corporate social performance and organizational attractiveness to

prospective employees Academy of Management Journal 40 658-672

25

Pfeffer J amp Langton N 1993 The Effect of Wage Dispersion on Satisfaction Productivity and Working

Collaboratively Evidence from College and University Faculty Administrative Science

Quarterly 38 382-407

Ployhart R E amp Moliterno T P 2011 Emergence of the human capital resource A multilevel model

Academy of Management Review 36(1) 127-150

Porter M 1985 Competitive Advantage New York Free Press

Ramus CA amp Steger U 2000 The roles of supervisory behaviors and environmental policy in

employee lsquoecoinitiativesrsquo at leadingedge European companies Academy of Management Journal

43 605-626

Rennison LW amp Turcotte J 2004 Productivity and Wages Measuring the Effect of Human Capital and

Technology use from Linked Employer-Employee Data Working paper Department of Finance

Economic and Fiscal Policy Branch Canada No 2004ndash01

Russo M V amp Fouts PA 1997 A Resource-based Perspective on Corporate Environmental

Performance and Profitability Academy of Management Journal 40(3) 534-59

Salis S amp Williams AM 2010 Knowledge Sharing Through Face-to-Face Communication and Labor

Productivity Evidence from British Workplaces British Journal of Industrial Relations 48 436-

459

Samuelson P A amp Nordhaus WD 1989 Economics (13th ed) New York McGraw-Hill

Sharma S 2000 Managerial interpretations and organizational context as predictors of corporate choice of

environmental strategy Academy of Management Journal 43(4) 681-697

Shook CL Ketchen DJ Hult GTM amp Kacmar KM 2004 An assessment of the use of structural

equation modeling in strategic management research Strategic Management Journal 25 397-

404

SHRM 2011 Advancing sustainability HRrsquos role A research report by the Society for Human Resource

Management BSR and Aurosoorya

httpwwwshrmorgresearchsurveyfindingsarticlespagesadvancingsustainabilityhrE280

99sroleaspx

Simonin BL 1999 Ambiguity and the process of knowledge transfer in strategic alliances Strategic

Management Journal 20595-623

Skaggs BC amp Youndt MA 2004 Strategic positioning human capital and performance in service

organisations A customer interaction approach Strategic Management Journal 2585-99

Smitka M 1991 Competitive ties Subcontracting in the Japanese automotive industry New York

Columbia University Press

Sousa-Poza A amp Ziegler A 2003 Asymmetric information about workers productivity as a cause for

inefficient long working hours Labour Economics 10 727-747

Steiger JH 1990 Structural Model Evaluation and Modification ndash an Interval Estimation Approach

Multivariate Behavioral Research 25173-180

Stewart TA 1997 Intellectual capital The new wealth of organization New York Bantam Doubleday

Dell Publishing Group Inc

Tomer J F 1990 Developing world class organization Investing in organizational capital Technovation

10(4) 253ndash263

Tucker LR amp Lewis C 1973 Reliability Coefficient for Maximum Likelihood Factor-Analysis

Psychometrika 381-10

Turban DB amp Greening DW 1997 Corporate social performance and organizational attractiveness to

prospective employees Academy of Management Journal 40 658-672

26

Uzzi B 1997 Social structure and competition in interfirm networks The paradox of embeddedness

Administrative Science Quarterly 42 35-67

Viswesvaran C Deshpande SP amp Joseph J 1998 Job satisfaction as a function of top management

support for ethical behaviour Journal of Business Ethics 17 365-371

von Hippel E 1988 The Sources of Innovation New York Oxford University Press

Wadhwani S amp Wall M 1990 The Effects of Profit Sharing on Employment Wages Stock Returns and

Productivity Evidence from UK Micro Data Economic Journal 100 (399) 1-17

Wright P M amp McMahan G C 1992 Theoretical perspectives for strategic human resource

management Journal of Management 18 292ndash320

Wright P M amp Snell S A 1998 Toward a unifying framework for exploring fit and flexibility in

strategic human resource management Academy of Management Review 23(4) 756ndash772

Youndt MA Subramaniam M amp Snell SA 2004 Intellectual capital profiles an examination of

investments and returns Journal of Management Studies 41335-362

Zwick T 2004 Employee participation and productivity Labor Economics 11 715-740

27

Figure 1 The Engaged Organization

28

Figure 2 Hypothesized relations

29

Table 1 Definition of variables and sample statistics

Variable Description Mean S D Min Max

Labor

Productivity

Valued added per employee in 2008 (ln) 413 076 -237 769

Financial

Participation

Employee profit-sharing scheme (euro) in

2008

2475 11905 000 267038

Interpersonal

Relations

Working Relations

Working Interaction

Helping environment

343

249

202

156

101

130

000

000

000

600

400

400

Inter-organizational

Relations

Customer Relation

Supplier Relation

External Partner Relation

356

242

139

188

089

106

000

000

000

800

300

300

Environmental

Practices

The firm has adopted innovative

practices

264 236 000 600

Training Customer Training

Quality Training

General training

056

162

257

147

219

251

000

000

000

600

600

600

Size Number of employees 2506 8569 2000 111956

Production Total Production Sold (euro) in 2006 584883 3063321 000 392685

31

Wage Average wage within a firm per hour in

2006

1514 14301 139 10318

Working hours Number of working hours per week 3769 696 100 8400

variables were retrieved from the COI variables retrieved from the CIS database variables retrieved

from the EAE database variables retrieved from the ESANE database variables retrieved from the

DADS database

30

Table 2 Measurement paths

Measurement paths Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations Working Relations 166 007 2988 071 Working Interaction 1 (fixed) 066 Helping environment 100 006 2989 051

Inter-organizational Relations Customer Relation 206 009 2397 054 Supplier Relation 1 (fixed) 055 External Partner Relation 143 006 2505 066

Training Customer Training 021 003 670 016 Quality Training 060 006 1018 030 General Training 1 (fixed) 044

Notes = p lt 0001

Table 3 Results of the Structural Model

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1589 025

Interpersonal Relations Labor Productivity 013 003 423 011

Inter-organizational Relations Labor Productivity 012 004 326 0001 007

Environmental Practices Labor Productivity 003 000 589 009

Control Relations

Training Labor Productivity5 006 003 231 002 009

Size Labor Productivity 000 000 -1948 -048

Production Labor Productivity 000 000 1693 038

Wage Labor Productivity 000 000 099 032 001

Working Hours Labor Productivity 003 000 589 009

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

27

Figure 1 The Engaged Organization

28

Figure 2 Hypothesized relations

29

Table 1 Definition of variables and sample statistics

Variable Description Mean S D Min Max

Labor

Productivity

Valued added per employee in 2008 (ln) 413 076 -237 769

Financial

Participation

Employee profit-sharing scheme (euro) in

2008

2475 11905 000 267038

Interpersonal

Relations

Working Relations

Working Interaction

Helping environment

343

249

202

156

101

130

000

000

000

600

400

400

Inter-organizational

Relations

Customer Relation

Supplier Relation

External Partner Relation

356

242

139

188

089

106

000

000

000

800

300

300

Environmental

Practices

The firm has adopted innovative

practices

264 236 000 600

Training Customer Training

Quality Training

General training

056

162

257

147

219

251

000

000

000

600

600

600

Size Number of employees 2506 8569 2000 111956

Production Total Production Sold (euro) in 2006 584883 3063321 000 392685

31

Wage Average wage within a firm per hour in

2006

1514 14301 139 10318

Working hours Number of working hours per week 3769 696 100 8400

variables were retrieved from the COI variables retrieved from the CIS database variables retrieved

from the EAE database variables retrieved from the ESANE database variables retrieved from the

DADS database

30

Table 2 Measurement paths

Measurement paths Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations Working Relations 166 007 2988 071 Working Interaction 1 (fixed) 066 Helping environment 100 006 2989 051

Inter-organizational Relations Customer Relation 206 009 2397 054 Supplier Relation 1 (fixed) 055 External Partner Relation 143 006 2505 066

Training Customer Training 021 003 670 016 Quality Training 060 006 1018 030 General Training 1 (fixed) 044

Notes = p lt 0001

Table 3 Results of the Structural Model

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1589 025

Interpersonal Relations Labor Productivity 013 003 423 011

Inter-organizational Relations Labor Productivity 012 004 326 0001 007

Environmental Practices Labor Productivity 003 000 589 009

Control Relations

Training Labor Productivity5 006 003 231 002 009

Size Labor Productivity 000 000 -1948 -048

Production Labor Productivity 000 000 1693 038

Wage Labor Productivity 000 000 099 032 001

Working Hours Labor Productivity 003 000 589 009

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

28

Figure 2 Hypothesized relations

29

Table 1 Definition of variables and sample statistics

Variable Description Mean S D Min Max

Labor

Productivity

Valued added per employee in 2008 (ln) 413 076 -237 769

Financial

Participation

Employee profit-sharing scheme (euro) in

2008

2475 11905 000 267038

Interpersonal

Relations

Working Relations

Working Interaction

Helping environment

343

249

202

156

101

130

000

000

000

600

400

400

Inter-organizational

Relations

Customer Relation

Supplier Relation

External Partner Relation

356

242

139

188

089

106

000

000

000

800

300

300

Environmental

Practices

The firm has adopted innovative

practices

264 236 000 600

Training Customer Training

Quality Training

General training

056

162

257

147

219

251

000

000

000

600

600

600

Size Number of employees 2506 8569 2000 111956

Production Total Production Sold (euro) in 2006 584883 3063321 000 392685

31

Wage Average wage within a firm per hour in

2006

1514 14301 139 10318

Working hours Number of working hours per week 3769 696 100 8400

variables were retrieved from the COI variables retrieved from the CIS database variables retrieved

from the EAE database variables retrieved from the ESANE database variables retrieved from the

DADS database

30

Table 2 Measurement paths

Measurement paths Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations Working Relations 166 007 2988 071 Working Interaction 1 (fixed) 066 Helping environment 100 006 2989 051

Inter-organizational Relations Customer Relation 206 009 2397 054 Supplier Relation 1 (fixed) 055 External Partner Relation 143 006 2505 066

Training Customer Training 021 003 670 016 Quality Training 060 006 1018 030 General Training 1 (fixed) 044

Notes = p lt 0001

Table 3 Results of the Structural Model

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1589 025

Interpersonal Relations Labor Productivity 013 003 423 011

Inter-organizational Relations Labor Productivity 012 004 326 0001 007

Environmental Practices Labor Productivity 003 000 589 009

Control Relations

Training Labor Productivity5 006 003 231 002 009

Size Labor Productivity 000 000 -1948 -048

Production Labor Productivity 000 000 1693 038

Wage Labor Productivity 000 000 099 032 001

Working Hours Labor Productivity 003 000 589 009

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

29

Table 1 Definition of variables and sample statistics

Variable Description Mean S D Min Max

Labor

Productivity

Valued added per employee in 2008 (ln) 413 076 -237 769

Financial

Participation

Employee profit-sharing scheme (euro) in

2008

2475 11905 000 267038

Interpersonal

Relations

Working Relations

Working Interaction

Helping environment

343

249

202

156

101

130

000

000

000

600

400

400

Inter-organizational

Relations

Customer Relation

Supplier Relation

External Partner Relation

356

242

139

188

089

106

000

000

000

800

300

300

Environmental

Practices

The firm has adopted innovative

practices

264 236 000 600

Training Customer Training

Quality Training

General training

056

162

257

147

219

251

000

000

000

600

600

600

Size Number of employees 2506 8569 2000 111956

Production Total Production Sold (euro) in 2006 584883 3063321 000 392685

31

Wage Average wage within a firm per hour in

2006

1514 14301 139 10318

Working hours Number of working hours per week 3769 696 100 8400

variables were retrieved from the COI variables retrieved from the CIS database variables retrieved

from the EAE database variables retrieved from the ESANE database variables retrieved from the

DADS database

30

Table 2 Measurement paths

Measurement paths Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations Working Relations 166 007 2988 071 Working Interaction 1 (fixed) 066 Helping environment 100 006 2989 051

Inter-organizational Relations Customer Relation 206 009 2397 054 Supplier Relation 1 (fixed) 055 External Partner Relation 143 006 2505 066

Training Customer Training 021 003 670 016 Quality Training 060 006 1018 030 General Training 1 (fixed) 044

Notes = p lt 0001

Table 3 Results of the Structural Model

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1589 025

Interpersonal Relations Labor Productivity 013 003 423 011

Inter-organizational Relations Labor Productivity 012 004 326 0001 007

Environmental Practices Labor Productivity 003 000 589 009

Control Relations

Training Labor Productivity5 006 003 231 002 009

Size Labor Productivity 000 000 -1948 -048

Production Labor Productivity 000 000 1693 038

Wage Labor Productivity 000 000 099 032 001

Working Hours Labor Productivity 003 000 589 009

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

30

Table 2 Measurement paths

Measurement paths Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations Working Relations 166 007 2988 071 Working Interaction 1 (fixed) 066 Helping environment 100 006 2989 051

Inter-organizational Relations Customer Relation 206 009 2397 054 Supplier Relation 1 (fixed) 055 External Partner Relation 143 006 2505 066

Training Customer Training 021 003 670 016 Quality Training 060 006 1018 030 General Training 1 (fixed) 044

Notes = p lt 0001

Table 3 Results of the Structural Model

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1589 025

Interpersonal Relations Labor Productivity 013 003 423 011

Inter-organizational Relations Labor Productivity 012 004 326 0001 007

Environmental Practices Labor Productivity 003 000 589 009

Control Relations

Training Labor Productivity5 006 003 231 002 009

Size Labor Productivity 000 000 -1948 -048

Production Labor Productivity 000 000 1693 038

Wage Labor Productivity 000 000 099 032 001

Working Hours Labor Productivity 003 000 589 009

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

31

Appendix A1 Measurement paths (Service Sectors)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 162 008 2127 073

Working Interaction 1 (fixed) 069

Helping environment 099 005 1912 054

Inter-organizational Relations

Customer Relation 205 015 1373 050

Supplier Relation 1 (fixed) 049

External Partner Relation 124 009 1427 066

Training

Customer Training 069 010 663 033

Quality Training 087 013 686 038

General Training 1 (fixed) 036

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

32

Appendix A2 Results of the Structural Model (Service Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 748 026

Interpersonal Relations Labor Productivity 026 004 634 022

Inter-organizational Relations Labor Productivity 018 006 295 0003 010

Environmental Practices Labor Productivity 002 001 244 0015 005

Control Relations

Training Labor Productivity 001 004 021 083 001

Size Labor Productivity 000 000 -1185 -042

Production Labor Productivity 000 000 878 022

Wage Labor Productivity 000 000 054 059 001

Working Hours Labor Productivity 001 000 429 010

Notes = p lt 0001

Appendix B2 Measurement paths (Manufacturing Sector)

Measurement paths

Unstandardized

regression

weight

Standard

error

Critical

ratio

Standardized

regression

weight

p-

value

Interpersonal Relations

Working Relations 174 009 1933 068

Working Interaction 1 (fixed) 062

Helping environment 103 006 1824 049

Inter-organizational Relations

Customer Relation 223 011 1933 058

Supplier Relation 1 (fixed) 058

External Partner Relation 144 007 1961 062

Training

Customer Training 015 003 544 017

Quality Training 055 007 763 028

General Training 1 (fixed) 046

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001

33

Appendix B2 Results of the Structural Model (Manufacturing Sector)

Antecedent variable Consequent variable Regression

weight

Standard

error

Critical

ratio

p-

value

Standardized

regression weight

Hypothesized Relations

Financial Participation Labor Productivity 000 000 1202 022

Interpersonal Relations Labor Productivity -006 004 -149 014 -006

Inter-organizational Relations Labor Productivity 008 004 199 0047 006

Environmental Practices Labor Productivity 003 001 614 012

Control Relations

Training Labor Productivity 009 003 272 0007 015

Size Labor Productivity 000 000 -1123 -045

Production Labor Productivity 000 000 1058 042

Wage Labor Productivity 002 000 1053 020

Working Hours Labor Productivity -001 000 -369 -007

Notes = p lt 0001