Using the Herd: How Firms Can Leverage Peer Effects to Increase Share Plan Participation

Well implemented and communicated, employee share purchase plans (ESPPs) constitute an effective management instrument and positively affect firm performance. However, their success depends on the participation of employees. Current studies show that there is still potential to improve participation rates. Peer effects represent a lever to boost participation. The Share Matching Program at Siemens is a great example of successfully implementing and communicating an ESPP. Since this ESPP is globally implemented, it provides a unique opportunity to analyze and compare peer effects for different employee groups. Using ordinary least square regressions, we show that the individual participation decision is significantly associated with the average participation within the employee’s organizational unit and that this relationship varies across countries, age groups, and corporate functions. By indicating employee groups that are most prone to peer effects, the findings provide critical managerial implications for employee communication strategies at Siemens and other firms.