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

Type of Work

Article

Date

2012

Journal Title

Journal of Entrepreneurial and Organizational Diversity

Journal Title - Alternate

JEOD

Journal ISSN

2281-8642

Journal Volume

1

Journal Issue

1

First Page

37

Last Page

64

DOI

10.5947/jeod.2012.003

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.

JEL classification: G34, L25, P0, P13

Hamilton Areas of Study

Economics

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