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Explaining Cooperative Enterprises through Knowledge Acquisition Outcomes

Author

Listed:
  • Helmut Dietl

    (Department of Business Administration, University of Zurich)

  • Tobias Duschl

    (Department of Business Administration, University of Zurich)

  • Martin Grossmann

    (Department of Business Administration, University of Zurich)

  • Markus Lang

    (Department of Business Administration, University of Zurich)

Abstract

This paper develops a formal model of a cooperative enterprise which explains why cooperatives are present in such a large number of sectors. In our model of a multi-stage production process, we account for the possibility that producers can acquire knowledge to decrease their cost of production. We distinguish between knowledge that can be generalized among producers, and knowledge that cannot be generalized and therefore is idiosyncratic to each production site. We compare the cooperative's outcomes with simple models of a vertically separated market of autonomous producers and of a centralized hierarchy consisting of fully owned subsidiaries. To conduct a meaningful comparison, we establish equilibrium outcomes for knowledge acquisition, output, and profits generated in each organizational arrangement. From the comparison, we derive parameter constellations, under which the cooperative outperforms the market and hierarchy forms of business organization. This article contributes to the organizational economic analysis of cooperatives and provides a model that illustrates the competitive advantages of cooperatives in the market-hierarchy continuum.

Suggested Citation

  • Helmut Dietl & Tobias Duschl & Martin Grossmann & Markus Lang, 2007. "Explaining Cooperative Enterprises through Knowledge Acquisition Outcomes," Working Papers 0068, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Dec 2011.
    • Handle: RePEc:iso:wpaper:0068
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    References listed on IDEAS

    as
    1. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    2. Peter Helmberger & Sidney Hoos, 1962. "Cooperative Enterprise and Organization Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 44(2), pages 275-290.
    3. Richard Phillips, 1953. "Economic Nature of the Cooperative Association," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 35(1), pages 74-87.
    4. Michael Higl, 2003. "Vertikale Kooperation im Oligopol Die Gestaltung der Genossenschaftsorganisation als strategischer Zug," Discussion Paper Series 243, Universitaet Augsburg, Institute for Economics.
    5. Hansmann, Henry, 1988. "Ownership of the Firm," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
    6. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cooperative; hierarchy; market; organizational knowledge; knowledge acquisition;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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