Making sense of organizational environments: the adoption of employee stock options in the Indian technology sector

Abstract

Using data collected from interviews with human resource managers, corporate executives, and compensation consultants in India, this paper examines the adoption of US-style employee stock option (ESO) plans among Indian information technology firms and foreign-based multinational corporations operating in India between 1998 and 2004. The findings suggest that Indian firms adopted ESOs more cautiously and granted options more selectively than those in Silicon Valley, where, by the mid-1990s, very broad grants at all organizational levels had become commonplace. The data also suggest that this more cautious and selective approach in India was driven primarily by labor market conditions, and a lack of cognitive-cultural and normative alignment between the ESO practice and the institutional environment of Indian knowledge workers. By taking seriously the perspectives of actors who play key roles in processes of practice adoption, the analysis and findings raise the issue of how our understanding of cross-national variation in the diffusion and structure of employee ownership practices, particularly in new settings, can be enhanced by new research designs and a deeper engagement with more recent developments in international human resource management research and institutional theory.

Keywords:

• employee stock options
• India
• knowledge-based firms
• practice adoption and adaptation

Acknowledgments

The author would like to thank Howard Aldrich, Joseph Blasi, Panu Kalmi, Michael Lounsbury, Joan S.M. Meyers, Justin Miller, Sarah Soule, David Strang, Richard Swedberg, Pamela Tolbert, and members of the Organization Theory Research Group (OTREG) for feedback on earlier versions of this paper. This research was funded by grants from the Center for the Study of Economy and Society, and the Mario Einaudi for International Studies, both of Cornell University.