Does it pay to cooperate? The case of cooperatives in the Mexican manufacturing sector

Various economic theories suggest cooperatives are an inefficient organizational form, but empirical evidence remains elusive. In Europe, the data does not necessarily support this view. There, a cooperative‐friendly environment and policy infrastructure may explain this outcome. So what happens to cooperatives’ performance in a country where this type of organization is little known and public policies do not support them? To answer this question I used the Economic Censuses of Mexico to compare cooperatives and private firms in the country's manufacturing sector. Using a propensity score matching and the Oaxaca‐Blinder decomposition, several findings emerge. First, joint‐stock and individually owned firms do have a higher sales performance relative to cooperatives in Mexico. Second, as productive units mature and gain more experience, however, that sales gap declines. Within the different endowments that may explain these results, the population size of districts where productive units are located is a variable that appears on a recurring basis. Relative to private firms, cooperatives are located in smaller municipalities. Even though this may affect their sales, such location is the result of a strategy to safeguard the cooperative spirit.