Explaining Cooperative Enterprises through Knowledge Acquisition Outcomes
AbstractThis 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.
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Bibliographic InfoPaper provided by University of Zurich, Institute for Strategy and Business Economics (ISU) in its series Working Papers with number 0068.
Length: 37 pages
Date of creation: Sep 2007
Date of revision: Dec 2011
Cooperative; hierarchy; market; organizational knowledge; knowledge acquisition;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-09 (All new papers)
- NEP-KNM-2007-09-09 (Knowledge Management & Knowledge Economy)
- NEP-MIC-2007-09-09 (Microeconomics)
- NEP-NET-2007-09-09 (Network Economics)
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.:
- Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
- 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.
- Michael Higl, 2003. "Vertikale Kooperation im Oligopol Die Gestaltung der Genossenschaftsorganisation als strategischer Zug," Discussion Paper Series 243, Universitaet Augsburg, Institute for Economics.
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