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Social interactions and product quality: the value of pooling in cooperative entrepreneurial networks

Author

Listed:
  • Wendong Deng

    (NHTV Breda University of Applied Sciences)

  • George Hendrikse

    (Erasmus University)

Abstract

Why do cooperatives often pay a pooled price, despite the free-riding incentives it entails? In this paper, we highlight that a cooperative is an enterprise owned by a network of entrepreneurial members. By taking explicitly into account the social interactions among entrepreneurial members and the impact of social ties on members’ product quality provisions, we identify the circumstances when pooling is efficient. It is shown that social interactions mitigate the free-riding effect of pooling and that the amount of members’ social interactions depends upon, and increases with, the cooperative’s pooling ratio. We show that the complete pooling policy is not only economically efficient but also socially advantageous when the context of the cooperative is conducive to frequent social interactions among members.

Suggested Citation

  • Wendong Deng & George Hendrikse, 2018. "Social interactions and product quality: the value of pooling in cooperative entrepreneurial networks," Small Business Economics, Springer, vol. 50(4), pages 749-761, April.
  • Handle: RePEc:kap:sbusec:v:50:y:2018:i:4:d:10.1007_s11187-017-9893-3
    DOI: 10.1007/s11187-017-9893-3
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    References listed on IDEAS

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    Cited by:

    1. Maria Bastida & Alberto Vaquero García & Luisa Helena Pinto & Ana Olveira Blanco, 2022. "Motivational drivers to choose worker cooperatives as an entrepreneurial alternative: evidence from Spain," Small Business Economics, Springer, vol. 58(3), pages 1609-1626, March.
    2. Jürgen Antony & Torben Klarl, 2020. "Knowledge Transfer, Transitional Dynamics and Optimal Research & Development Policy in a Dynamic Monopoly Setting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 579-606, November.
    3. Peter-J. Jost, 2021. "Endogenous formation of entrepreneurial networks," Small Business Economics, Springer, vol. 56(1), pages 39-64, January.
    4. Chrysoula Morfi & Jerker Nilsson & Karin Hakelius & Kostas Karantininis, 2021. "Social networks and member participation in cooperative governance," Agribusiness, John Wiley & Sons, Ltd., vol. 37(2), pages 264-285, April.
    5. Carmen Guzmán & Francisco J. Santos & María de la O. Barroso, 2020. "Analysing the links between cooperative principles, entrepreneurial orientation and performance," Small Business Economics, Springer, vol. 55(4), pages 1075-1089, December.

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    More about this item

    Keywords

    Social capital; Social interaction; Cooperatives; Pooling policy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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