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

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  • 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
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    References listed on IDEAS

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    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. Anne Musson & Damien Rousselière, 2020. "Exploring the effect of crisis on cooperatives: a Bayesian performance analysis of French craftsmen cooperatives," Applied Economics, Taylor & Francis Journals, vol. 52(25), pages 2657-2678, May.
    4. Dean, Andrés, 2019. "Do successful worker-managed firms degenerate?," Journal of Comparative Economics, Elsevier, vol. 47(2), pages 317-329.
    5. Simon Cornée & Madeg Le Guernic & Damien Rousselière, 2020. "Governing Common-Property Assets: Theory and Evidence from Agriculture," Journal of Business Ethics, Springer, vol. 166(4), pages 691-710, November.
    6. 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.
    7. 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).
    8. Coccorese, Paolo & Ferri, Giovanni, 2020. "Are mergers among cooperative banks worth a dime? Evidence on efficiency effects of M&As in Italy," Economic Modelling, Elsevier, vol. 84(C), pages 147-164.
    9. 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).
    10. 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.
    11. Hans Groeneveld, 2020. "Reconciling different truths about isomorphic pressure and distinctive behavior at European cooperative banks: Back to the future with Raiffeisen's principles," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(3), pages 359-386, September.
    12. McKillop, Donal & French, Declan & Quinn, Barry & Sobiech, Anna L. & Wilson, John O.S., 2020. "Cooperative financial institutions: A review of the literature," International Review of Financial Analysis, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    co-operatives; democracy; efficiency; corporate governance; Mondragon; Finland;
    All these keywords.

    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

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