IDEAS home Printed from https://ideas.repec.org/a/trn/csnjrn/v1i1p37-64.html
   My bibliography  Save this article

Economies of Scale Versus Participation: a Co-operative Dilemma?

Author

Listed:
  • Derek C. Jones

    () (Hamilton College)

  • Panu Kalmi

    () (University of Vaasa)

Abstract

We examine the proposition that, in co-operatives, the need for democracy must clash with efficiency demands. To shed light on diverse issues surrounding this claim we distinguish different forms of co-operatives and identify different meanings of democratic governance and forms of economies of scale. One focus is on democratic decision-making within individual coops, including tensions between members and managers and/or boards, and how processes often labeled as “degeneration” can be averted. Another focus is on co-ordination problems among and between groups of coops in a network, or second tier co-ops, and how innovative forms of monitoring and forms of corporate governance may be expected to emerge in response to these potential difficulties. We also integrate evidence drawn from the available econometrics literature with this discussion. Our main source of empirical information is the provision of institutional evidence for the cases of Mondragon and co-operative banks in Finland. We conclude that the evidence for an alleged inexorable trade-off between democracy and efficiency is not compelling, but also note the need for additional theoretical and empirical work.

Suggested Citation

  • Derek C. Jones & Panu Kalmi, 2012. "Economies of Scale Versus Participation: a Co-operative Dilemma?," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 1(1), pages 37-64, December.
  • Handle: RePEc:trn:csnjrn:v:1:i:1:p:37-64
    as

    Download full text from publisher

    File URL: http://www.jeodonline.com/sites/jeodonline.com/files/articles/2012/12/21/jeodjones-kalmieconomiesofscaleversusparticipationaco-operativedilemma.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. David C. Wheelock & Paul W. Wilson, 2011. "Are Credit Unions Too Small?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1343-1359, November.
    2. Ben-ner, Avner, 1984. "On the stability of the cooperative type of organization," Journal of Comparative Economics, Elsevier, vol. 8(3), pages 247-260, September.
    3. 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.
    4. Wim Fonteyne, 2007. "Cooperative Banks in Europe—Policy Issues," IMF Working Papers 07/159, International Monetary Fund.
    5. Estrin, Saul & Jones, Derek C. & Svejnar, Jan, 1987. "The productivity effects of worker participation: Producer cooperatives in western economies," Journal of Comparative Economics, Elsevier, vol. 11(1), pages 40-61, March.
    6. Carlo Borzaga, 2013. "Social enterprise," Chapters, in: Luigino Bruni & Stefano Zamagni (ed.), Handbook on the Economics of Reciprocity and Social Enterprise, chapter 32, pages 318-326, Edward Elgar Publishing.
    7. 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.
    8. Panu Kalmi, 2007. "The disappearance of cooperatives from economics textbooks," Cambridge Journal of Economics, Oxford University Press, vol. 31(4), pages 625-647, July.
    9. 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.
    10. Lang, Gunter & Welzel, Peter, 1999. "Mergers among German Cooperative Banks: A Panel-Based Stochastic Frontier Analysis," Small Business Economics, Springer, vol. 13(4), pages 273-286, December.
    11. Lang, Gunter & Welzel, Peter, 1996. "Efficiency and technical progress in banking Empirical results for a panel of German cooperative banks," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1003-1023, July.
    12. Mitchell A. Petersen & Raghuram G. Rajan, 2002. "Does Distance Still Matter? The Information Revolution in Small Business Lending," Journal of Finance, American Finance Association, vol. 57(6), pages 2533-2570, December.
    13. Smith, Stephen C., 2001. "Blooming Together or Wilting Alone? Network Externalities and Mondrag.n and La Lega Co-operative Networks," WIDER Working Paper Series 027, World Institute for Development Economic Research (UNU-WIDER).
    14. Carlos E. Cuevas & Klaus P. Fischer, 2006. "Cooperative Financial Institutions : Issues in Governance, Regulation, and Supervision," World Bank Publications, The World Bank, number 7107, March.
    15. Leggett, Keith J. & Strand, Robert W., 2002. "Membership growth, multiple membership groups and agency control at credit unions," Review of Financial Economics, Elsevier, vol. 11(1), pages 37-46.
    16. Frank A. Schmid & William R. Emmons, 1999. "Credit unions and the common bond," Review, Federal Reserve Bank of St. Louis, vol. 81(Sep), pages 41-64.
    17. Seyed Mehdian & Rasoul Rezvanian, 1998. "Production economies of small depository institutions in the post-FIRREA era: evidence from cooperative banks," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 427-433.
    18. Giovanni Ferri & Panu Kalmi & Eeva Kerola, 2015. "Organizational Structure and Performance in European Banks: A Reassessment," Advances in the Economic Analysis of Participatory & Labor-Managed Firms, in: Antti Kauhanen (ed.), Advances in the Economic Analysis of Participatory & Labor-Managed Firms, volume 16, pages 109-141, Emerald Publishing Ltd.
    19. 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.
    20. Ellene Kebede & Dean F. Schreiner, 1996. "Economies of scale in dairy marketing cooperatives in Kenya," Agribusiness, John Wiley & Sons, Ltd., vol. 12(4), pages 395-402.
    21. Kolari, James & Zardkoohi, Asghar, 1990. " Economies of Scale and Scope in Thrift Institutions: The Case of Finnish Cooperative and Savings Banks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(3), pages 437-451.
    22. Guinnane, Timothy W., 2001. "Cooperatives As Information Machines: German Rural Credit Cooperatives, 1883–1914," The Journal of Economic History, Cambridge University Press, vol. 61(2), pages 366-389, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mikko MAKINEN & Derek C. JONES, 2015. "Comparative Efficiency Between Cooperative, Savings And Commercial Banks In Europe Using The Frontier Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 401-420, September.
    2. Anaïs Périlleux & Annabel Vanroose & Bert D'Espallier, 2016. "Are Financial Cooperatives Crowded out by Commercial Banks in the Process of Financial Sector Development?," Kyklos, Wiley Blackwell, vol. 69(1), pages 108-134, February.
    3. Musson, Anne & Rousselière, Damien, 2018. "Exploring the effect of crisis on cooperatives: A Bayesian performance analysis of French craftsmen cooperatives," Working Papers 279350, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    4. Dean, Andrés, 2019. "Do successful worker-managed firms degenerate?," Journal of Comparative Economics, Elsevier, vol. 47(2), pages 317-329.
    5. Pier Angelo MORI, 2014. "Community And Cooperation: The Evolution Of Cooperatives Towards New Models Of Citizens' Democratic Participation In Public Services Provision," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(3), pages 327-352, September.
    6. Maged Eid & Federico Mart�nez-Carrasco Pleite, 2014. "International Year of Cooperatives and the 2020 Vision," Euricse Working Papers 1471, Euricse (European Research Institute on Cooperative and Social Enterprises).
    7. Pier Angelo Mori, 2014. "Community and cooperation: the evolution of cooperatives towards new models of citizens� democratic participation in public services provision," Euricse Working Papers 1463, Euricse (European Research Institute on Cooperative and Social Enterprises).
    8. Lorea Narvaiza & Cristina Aragon & Cristina Iturrioz & Julie Bayle-Cordier & Sandrine Stervinou, 2017. "Cooperative Dynamics During the Financial Crisis: Evidence From Basque and Breton Case Studies," Post-Print hal-01414168, HAL.

    More about this item

    Keywords

    co-operatives; democracy; efficiency; corporate governance; Mondragon; Finland;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P0 - Economic Systems - - General
    • P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

    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:trn:csnjrn:v:1:i:1:p:37-64. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Barbara Franchini). General contact details of provider: http://edirc.repec.org/data/euricit.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.