Do strategic factors affect adoption of profit sharing? Longitudinal evidence from Canada

Despite the growing interest in strategic human resource management and strategic compensation, the firm's strategic context has rarely been examined as a possible predictor of profit sharing adoption, especially in longitudinal research, nor have all three possible strategic alignments (internal, horizontal, and vertical) been included in the same study. Based on three panels of longitudinal data from Canadian establishments drawn from three consecutive time periods, this paper finds strong support for internal (within compensation strategy) alignment, as a high-wage compensation policy is a significant predictor of profit sharing adoption in all three time periods. At the same time, significant support for a diffusion or institutional perspective on profit sharing adoption is also noted. These findings highlight the importance of including both strategic factors (particularly those that may be associated with internal alignment) and institutional factors in studies seeking to understand profit sharing adoption.