Competitive advantages of cooperation

Evidence of advantages that cooperative business models can offer

Addressing market failure

  • Delbono, Flavio (2017 lecture at University of Bologna) argues that, when supply and demand are out of balance, cooperatives tend to form on the weaker side; a strong demand, for instance, produces cooperatives on the supply side. Social cooperatives, however, organize both supply and demand, especially when there is not an adequate market mechanism for doing so.
  • Hueth (2014)
  • Mikami (2013)
  • Nourse (1922, 1942)

Commitment of users

  • Albæk and Schultz (1998), abstract: “the fact that farmers in a cooperative individually decide how much to supply to the cooperative may serve as a commitment device for credibly (and profitably) gaining market share in competition with a profit maximizing firm”
  • Bain and Company (2014)
  • Dal Bó (2010)
  • Hueth (2014)
  • Markussen et al (2014) - refers to “democratic dividend”

Community benefit

  • Zitger and Dilworth (2017): cooperatives can play a role in local community governance

Information sharing

  • Banerjee et al (2004)
  • Blasi et al. (?): for ESOPs
  • Bogetoft (2005)
  • Guinnane (2001)
  • Mikami (2013)

Leaner startup costs

  • Hueth (2014)

Lower rates of failure

  • Blasi et al. (?): for ESOPs
  • Molk (2014), 941: “the limited empirical studies on cooperative ownership versus investor ownership performance generally suggest cooperatives have lower failure rather than comparable investor-owned rivals”; later attributes this, possibly, to the greater difficulty of cooperative startups, weeding out inefficient models
  • Pérotin (2016): “Worker co-operatives survive at least as long as other businesses and have more stable employment”

Networking

  • Menzani and Zamagni (2009): articulates four forms of cooperative networking that are largely unavailable to other business models

Productivity benefits

  • Blasi et al. (?): for ESOPs
  • Bogetoft (2005), abstract: “when marginal costs are uncorrelated, the market for final goods is competitive, and the market for processing is non-competitive, the socially optimal production levels are sustained by a cooperative and a cooperative only”
  • Molk (2014), 941: “cooperatives broadly have higher measures of productivity than comparable investor-owned firms”; later attributes this, possibly, to the greater difficulty of cooperative startups, weeding out inefficient models
  • Pérotin (2016): “Worker cooperatives are more productive than conventional businesses, with staff working 'better and smarter' and production organised more efficiently”

Protection from exploitation

  • Hansmann (2000)
  • Pérotin (2016): “Executive and non-executive pay differentials are much narrower in worker co-operatives than other firms”

Resilience in economic hardship

  • Alves et al. (2016)
  • Blasi et al. (?): for ESOPs
  • Burdín and Dean (2009)
  • Economist (2009): the perseverance of Mondragon during the recession

Transaction cost

  • Hansmann (2000)
  • Hueth (2014)
  • Pérotin (2016): “Worker co-operatives retain a larger share of their profits than other business models”

Vertical integration

  • Menzani and Zamagni (2009): vertical networks
  • Molk (2014), 912: “At a basic level, all cooperatives accomplish vertical integration, coupling the firm with an upstream (supplier/producer) or downstream (consumer) process. Because of this vertical integration, the cooperative captures the profits ordinarily accruing to the upstream or downstream process.”

Works cited

See also