Leadership and the importance of social capital in the transition of cooperatives: A Case Study of Two Cooperatives

In Hungary radical reforms have meant that an increasing number of cooperatives have either fragmented or gone bankrupt because of not being competitive under current market conditions. Others, however, have been able to maintain or even improve on their previous success. Individual farmers have also established new cooperatives and are trying to further cooperation. This paper discusses the importance of cooperatives’ management during the transition period, a topic which the pertinent literature does not fully address. Production co-ops were not only economic units but also social networks. Two successful cooperatives from the same town, one old and one new, have been used and comparisons drawn regarding their management and progress, both of which were backed by social capital. The findings show that, in the traditional agricultural co-op, a more social- (member) oriented leadership has helped to overcome economic, social, and psychological barriers erected during transition. With the new co-op, the post-reform period has prompted enhanced cooperation mainly dependent on a increased level of social capital.