IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v72y2009i1p322-343.html
   My bibliography  Save this article

Organizational structure, redistribution and the endogeneity of cost: Cooperatives, investor-owned firms and the cost of procurement

Author

Listed:
  • Bontems, Philippe
  • Fulton, Murray

Abstract

As an organizational type, cooperatives are in general not the dominant form of enterprise. Nevertheless, cooperatives and cooperative-like organizations do play important roles in a number of sectors, suggesting that in some circumstances they are more efficient than other business forms. This paper explores the importance of membership goals on the relative efficiency of the cooperative form of organization. The cooperative cost (and hence production efficiency) advantage is directly linked to the goal alignment between the cooperative and its members, and is influenced by the extent of income redistribution between members and the degree of rent seeking that takes place in the organization. When there is no aversion to income inequality, the members produce at their first best levels. However, as aversion to inequality rises, the production profile of the members converges to the production profile generated when the members face an IOF. Regarding rent seeking, if the more (less) efficient members are able to get their profits valued more, total output is increased (decreased). As a consequence, consumers may benefit from the lobbying that occurs inside a cooperative where the powerful members are the most efficient agents.

Suggested Citation

  • Bontems, Philippe & Fulton, Murray, 2009. "Organizational structure, redistribution and the endogeneity of cost: Cooperatives, investor-owned firms and the cost of procurement," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 322-343, October.
  • Handle: RePEc:eee:jeborg:v:72:y:2009:i:1:p:322-343
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-2681(09)00178-4
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Svend Albæk & Christian Schultz, 1997. "One Cow, One Vote?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 597-615, December.
    2. Zusman, Pinhas & Rausser, Gordon C., 1994. "Intraorganizational influence relations and the optimality of collective action," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 1-17, June.
    3. Yoram Barzel & Tim R. Sass, 1990. "The Allocation of Resources by Voting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 745-771.
    4. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    5. Michael L. Cook, 1995. "The Future of U.S. Agricultural Cooperatives: A Neo-Institutional Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(5), pages 1153-1159.
    6. Jean-Marc Bourgeon & Robert G. Chambers, 1999. "Producer Organizations, Bargaining, and Asymmetric Information," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 602-609.
    7. R. Carson, 1977. "A Theory of Co-operatives," Canadian Journal of Economics, Canadian Economics Association, vol. 10(4), pages 565-589, November.
    8. Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 2001. "Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra," Journal of Political Economy, University of Chicago Press, vol. 109(1), pages 138-190, February.
    9. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 115-138.
    10. Albaek, Svend & Schultz, Christian, 1998. "On the relative advantage of cooperatives," Economics Letters, Elsevier, vol. 59(3), pages 397-401, June.
    11. 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.
    12. Pinhas Zusman, 1982. "Group Choice in an Agricultural Marketing Co-operative," Canadian Journal of Economics, Canadian Economics Association, vol. 15(2), pages 220-234, May.
    13. Peter Vitaliano, 1983. "Cooperative Enterprise: An Alternative Conceptual Basis for Analyzing a Complex Institution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(5), pages 1078-1083.
    14. Rey, Patrick & Tirole, Jean, 2000. "Loyalty and Investment in Cooperatives," IDEI Working Papers 123, Institut d'Économie Industrielle (IDEI), Toulouse.
    15. George W. J. Hendrikse & Cees P. Veerman, 2001. "Marketing Co‐operatives: An Incomplete Contracting Perspective," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(1), pages 53-64, January.
    16. Michael E. Sykuta & Michael L. Cook, 2001. "A New Institutional Economics Approach to Contracts and Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1273-1279.
    17. Berit Tennbakk, 1995. "Marketing Cooperatives In Mixed Duopolies," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(1), pages 33-45, January.
    18. Richard J. Sexton, 1984. "Perspectives on the Development of the Economic Theory of Co-operatives," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 32(2), pages 423-436, July.
    19. James Vercammen & Murray Fulton & Charles Hyde, 1996. "Nonlinear Pricing Schemes for Agricultural Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 572-584.
    20. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
    21. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
    22. Condon, Andrew M. & Cotterill, Ronald W. & Rhodes, V. James & Shaffer, James D. & Staatz, John M., 1987. "Cooperative Theory: New Approaches," Service Reports (SR) 280614, United States Department of Agriculture, Rural Development.
    23. Murray Fulton & Konstantinos Giannakas, 2001. "Organizational Commitment in a Mixed Oligopoly: Agricultural Cooperatives and Investor-Owned Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1258-1265.
    24. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    25. Richard J. Sexton, 1990. "Imperfect Competition in Agricultural Markets and the Role of Cooperatives: A Spatial Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 709-720.
    26. Robert H. Frank, 1984. "Interdependent Preferences and the Competitive Wage Structure," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 510-520, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 18942, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Marco A. MARINI & Paolo POLIDORI & Desiree TEOBALDELLI & Alberto ZEVI, 2015. "Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 505-527, September.
    3. George Hendrikse & Li Feng, 2013. "Interfirm cooperatives," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 26, Edward Elgar Publishing.
    4. repec:vuw:vuwscr:18942 is not listed on IDEAS
    5. Drivas, Kyriakos & Giannakas, Konstantinos, 2008. "Process Innovation Activity in a Mixed Oligopsony: The Role of Marketing Cooperatives," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 36(2), pages 1-26.
    6. Kyriakos Drivas & Konstantinos Giannakas, 2010. "The Effect of Cooperatives on Quality‐Enhancing Innovation," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 295-317, June.
    7. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    8. Julia HÖHLER & Rainer KÜHL, 2018. "Dimensions Of Member Heterogeneity In Cooperatives And Their Impact On Organization – A Literature Review," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 697-712, December.
    9. Ahmet Candemir & Sabine Duvaleix & Laure Latruffe, 2021. "Agricultural Cooperatives And Farm Sustainability – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1118-1144, September.
    10. Jasper GRASHUIS & Michael COOK, 2018. "An Examination Of New Generation Cooperatives In The Upper Midwest: Successes, Failures, And Limitations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 623-644, December.
    11. Malvido Perez Carletti Agustina & Hanisch Markus & Rommel Jens & Fulton Murray, 2018. "Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-14, January.
    12. Grashuis, Jasper & Cook, Michael, 2016. "Capital, Ownership, and Governance: Analyzing the Structure of U.S. Farmer Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235677, Agricultural and Applied Economics Association.
    13. Michael Higl, 2003. "Vertikale Kooperation im OligopolDie Gestaltung der Genossenschaftsorganisation als strategischer Zug," Discussion Paper Series 243, Universitaet Augsburg, Institute for Economics.
    14. Kalogeras, Nikos & van der Lans, Ivo A.C.M. & Pennings, Joost M.E. & van Dijk, Gert, 2004. "Members' Preferences For Cooperative Structures: An Experimental Conjoint Study," 2004 Annual meeting, August 1-4, Denver, CO 20292, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    15. Hueth, Brent & Marcoul, Philippe, 2007. "The Cooperative Firm as Monitored Credit," Staff Paper Series 508, University of Wisconsin, Agricultural and Applied Economics.
    16. Constantine Iliopoulos & Vladislav Valentinov, 2018. "Member Heterogeneity in Agricultural Cooperatives: A Systems-Theoretic Perspective," Sustainability, MDPI, vol. 10(4), pages 1-22, April.
    17. Iliopoulos, Constantine & Valentinov, Vladislav, 2018. "Member heterogeneity in agricultural cooperatives: A systems-theoretic perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 10(4), pages 1-22.
    18. Franken, Jason R.V. & Cook, Michael L., 2015. "Investment Constraints in Agricultural Cooperatives," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205427, Agricultural and Applied Economics Association.
    19. Qiao Liang & George Hendrikse & Zuhui Huang & Xuchu Xu, 2015. "Governance Structure of Chinese Farmer Cooperatives: Evidence From Zhejiang Province," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 198-214, April.
    20. Harvey S. James & Michael E. Sykuta, 2005. "Property Right and Organizational Characteristics of Producer‐owned Firms and Organizational Trust," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(4), pages 545-580, December.
    21. Benmehaia, Mohamed Amine & Brabez, Fatima, 2016. "The Propensity To Cooperate Among Peasant Farmers In Algeria: An Analysis From Bivariate Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(4), pages 1-14, October.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:72:y:2009:i:1:p:322-343. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.