1. ¹Stockholm School of Economics, Sweden
2. ²UMass Lowell, University of Massachusetts, Lowell, USA
3. ³INSEAD, France
4. ⁴North Carolina State University, USA

Correspondence: W Lazonick, Strategy Area INSEAD Boulevard de Constance 77305 Fontainebleu Cedex, France. Tel.: +33 1 60 72 40 00; Fax: +33 1 60 74 55 00; E-mail: William.LAZONICK@insead.edu

Abstract

From 1998 to 2002 the Sweden-based telecommunications equipment company, Ericsson, instituted a series of stock option plans, thus emulating a distinctly American mode of compensating high-tech personnel. Then in 2003, Ericsson did not renew its stock option program. Instead Corporate HR developed a unique employee stock purchase plan that made central use of an HR tool inherited from the 2001 and 2002 stock option plans to reward a subgroup of outstanding non-executive employees. The Ericsson experience with stock options shows that corporate HR managers can graft an alien mode of compensation onto a well-developed organizational structure without undermining the integrity of that structure. Our close examination of the transfer of US-style stock options to Ericsson shows why convergence to the latest US business model is not an inevitable outcome, and how in global competition in the ICT industries alternative business models can still result in competitive success.