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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 systems in cooperatives and in investor-owned enterprises. The difference between the two forms is reduced to the type of majority needed to take decisions: 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. This finding tallies with empirical evidence suggesting that cooperatives are undercapitalised.

Suggested Citation

  • Alberto Bacchiega & Gianni De Fraja, "undated". "Constitutional Design and Investment in Cooperatives and Investor-Owned Enterprises," Discussion Papers 99/5, Department of Economics, University of York.
  • Handle: RePEc:yor:yorken:99/5
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    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/1999/9905.pdf
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    References listed on IDEAS

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    1. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," NBER Working Papers 6421, National Bureau of Economic Research, Inc.
    2. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
    3. 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.
    4. Jonathan Levin, 2002. "A Theory of Partnerships," Theory workshop papers 505798000000000002, UCLA Department of Economics.
    5. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    6. 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.
    7. 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.
    8. Michael Kremer, 1997. "Why are Worker Cooperatives So Rare?," NBER Working Papers 6118, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Stefano Zamagni, 2013. "Cooperative entrepreneurship," Chapters,in: Handbook on the Economics of Reciprocity and Social Enterprise, chapter 9, pages 94-107 Edward Elgar Publishing.
    2. Stefano Zamagni & Vera Zamagni, 2010. "Cooperative Enterprise," Books, Edward Elgar Publishing, number 13842, April.
    3. 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.

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