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Constitutional Design and Investment in Cooperatives and Investor-Owned Enterprises

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  • Alberto Bacchiega
  • Gianni De Fraja

Abstract

This paper studies the role of the corporate governance system in cooperatives and in investor-owned enterprises. We abstract from all possible differences between the two systems except the type of majority needed to take decisions: this is one-head-one-vote for cooperatives and proportional to capital invested in investor-owned firms. We show that the institutional form chosen matters for the initial investment decision of the agents: in particular we find that members of a cooperative invest less than they would in an investor-owned enterprise. Copyright CIRIEC, 2004.

Suggested Citation

  • Alberto Bacchiega & Gianni De Fraja, 2004. "Constitutional Design and Investment in Cooperatives and Investor-Owned Enterprises," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(2), pages 265-293, June.
  • Handle: RePEc:bla:annpce:v:75:y:2004:i:2:p:265-293
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    References listed on IDEAS

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    1. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
    2. Hart, Oliver & Moore, John, 1998. "Cooperatives vs. outside ownership," LSE Research Online Documents on Economics 19360, London School of Economics and Political Science, LSE Library.
    3. 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 1290-1320, September.
    4. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
    5. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
    6. Michael Kremer, 1997. "Why are Worker Cooperatives So Rare?," NBER Working Papers 6118, National Bureau of Economic Research, Inc.
    7. Jonathan Levin, 2002. "A Theory of Partnerships," Theory workshop papers 505798000000000002, UCLA Department of Economics.
    8. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
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    Cited by:

    1. Stefano Zamagni & Vera Zamagni, 2010. "Cooperative Enterprise," Books, Edward Elgar Publishing, number 13842, April.
    2. Zamagni, Stefano, 2005. "Per una teoria economico-civile dell'impresa cooperativa," AICCON Working Papers 10-2005, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
    3. Stefano Zamagni, 2013. "Cooperative entrepreneurship," Chapters,in: Handbook on the Economics of Reciprocity and Social Enterprise, chapter 9, pages 94-107 Edward Elgar Publishing.

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