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Efficiency in Employee-Owned Enterprises: An Econometric Case Study of Mondragon

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Author Info

  • Arando, Saioa

    ()
    (Mondragon University)

  • Gago, Monica

    ()
    (Mondragon University)

  • Jones, Derek C.

    ()
    (Hamilton College)

  • Kato, Takao

    ()
    (Colgate University)

Abstract

We provide the first econometric study of efficiency for a member of the Mondragon group of worker cooperatives. Eroski is a retail distribution chain and, most unusually, there are two distinct types of hypermarkets: (i) cooperatives with significant employee ownership and voice; and (ii) GESPAs with modest employee ownership and limited voice. For supermarkets the chain includes conventional firms with no employee ownership as well. Our key data are a panel of monthly observations from February 2006 through May 2008, a total of 9,800 observations for supermarkets and 2,150 for hypermarkets. By estimating first difference models we find that hypermarket stores with cooperative ownership grow sales significantly faster than GESPA stores. For supermarkets overall we find no significant difference in performance among the three types of stores. However, for a particular segment of the supermarket called SUPERMARKET CITY (a subgroup of small supermarkets for which having "better customer service" employees is particularly important), cooperatives are found to outperform conventional stores. To investigate mechanisms that help explain why cooperatives are better performers we provide additional evidence that takes account of the role of the more extensive opportunities for employee involvement and training, and stronger economic incentives that exist in cooperatives. Finally, while cooperative members are better paid than their peers in comparable firms, individual-level data also show that job satisfaction is actually lower for workers in cooperatives than for GESPA workers. Though this may be a simple reflection of high worker expectation in cooperatives, cooperatives may well be indeed a "high-stress work system." The overall assessment of cooperatives will need to be nuanced.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5711.

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Length: 43 pages
Date of creation: May 2011
Date of revision:
Publication status: forthcoming in: Industrial and Labor Relations Review, 2014
Handle: RePEc:iza:izadps:dp5711

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Related research

Keywords: Mondragon; productive efficiency; labor managed firm; producer cooperatives; employee ownership; shared capitalism;

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  1. Ben-Ner, Avner & Kong, Fanmin & Bosley, Stacie A. & Burns, W. Allen & Butler, Richard & Han, Tzu-Shian & Liu, Nien-Chi & Park, Yong-Seung, 1999. "Workplace Organization And Human Resource Practices: The Retail Food Industry," Working Papers 14315, University of Minnesota, The Food Industry Center.
  2. Casey Ichniowski & Kathryn Shaw, 2003. "Beyond Incentive Pay: Insiders' Estimates of the Value of Complementary Human Resource Management Practices," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 155-180, Winter.
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  4. Burdín, Gabriel & Dean, Andrés, 2009. "New evidence on wages and employment in worker cooperatives compared with capitalist firms," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 517-533, December.
  5. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-320, September.
  6. Dow,Gregory K., 2003. "Governing the Firm," Cambridge Books, Cambridge University Press, number 9780521522212, Fall.
  7. Saul Estrin & Jan Hanousek & Evzen Kocenda & Jan Svejnar, 2009. "The Effects of Privatization and Ownership in Transition Economies," Journal of Economic Literature, American Economic Association, vol. 47(3), pages 699-728, September.
  8. Brent Boning & Casey Ichniowski & Kathryn Shaw, 2007. "Opportunity Counts: Teams and the Effectiveness of Production Incentives," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 613-650.
  9. Takao Kato & Motohiro Morishima, 1995. "The Productivity Effects of Human Resource Management Practices: Evidence from New Japanese Panel Data," Economics Working Paper Archive wp_143, Levy Economics Institute.
  10. Jones, Derek C & Backus, David K, 1977. "British Producer Cooperatives in the Footwear Industry: An Empirical Evaluation of the Theory of Financing," Economic Journal, Royal Economic Society, vol. 87(347), pages 488-510, September.
  11. Chris Doucouliagos, 1995. "Worker participation and productivity in labor-managed and participatory capitalist firms: A meta-analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(1), pages 58-77, October.
  12. Joshi, Sumit & Smith, Stephen C., 2008. "Endogenous formation of coops and cooperative leagues," Journal of Economic Behavior & Organization, Elsevier, vol. 68(1), pages 217-233, October.
  13. Defourney, Jacques & Estrin, Saul & Jones, Derek C., 1985. "The effects of workers' participation on enterprise performance : Empirical evidence from French cooperatives," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 197-217, June.
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