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The Organizational Advantages of Cooperatives: Knowledge Generation, Knowledge Acquisition, and Hold-up Mitigation

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Author Info
Helmut Dietl () (Institute for Strategy and Business Economics, University of Zurich)
Martin Grossmann () (Institute for Strategy and Business Economics, University of Zurich)
Markus Lang () (Institute for Strategy and Business Economics, University of Zurich)

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Abstract

Considering their practical importance, cooperatives are among the least researched forms of organization found in the literature. In this paper, we develop a model to compare markets, cooperatives, and hierarchies in terms of organizational efficiency. We show that these three alternative forms of business organizations differ with respect to the acquisition of general versus idiosyncratic knowledge and with respect to their effectiveness in solving hold-up problems. Market forms of business organizations are a marvel with respect to the aggregation and use of idiosyncratic knowledge, but they cause hold-up problems in the case of specific investments. Cooperative and hierarchical forms of business organizations, on the other hand, solve hold-up problems and effectively enhance the acquisition and use of general knowledge. Moreover, we show that cooperative organizations dominate market organizations (hierarchical organizations) in terms of efficiency if the acquisition of general (idiosyncratic) knowledge is important for value creation in a specific industrial sector.

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Publisher Info
Paper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0068.

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Length: 31 pages
Date of creation: Sep 2007
Date of revision: Nov 2009
Handle: RePEc:iso:wpaper:0068

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Related research
Keywords: Cooperative; hierarchy; market; hold-up problem; information; organizational knowledge; idiosyncratic and general knowledge; implicit and explicit knowledge;

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
  2. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  3. Michael Higl, 2003. "Vertikale Kooperation im Oligopol Die Gestaltung der Genossenschaftsorganisation als strategischer Zug," Discussion Paper Series 243, Universitaet Augsburg, Institute for Economics. [Downloadable!]
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