Economies of Scale Versus Participation: A Co-Operative Dilemma?

28 Pages Posted: 28 Dec 2012

See all articles by Derek C. Jones

Derek C. Jones

Hamilton College - Economics Department

Panu Kalmi

Aalto University - Department of Economics

Date Written: December 21, 2012

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.

Keywords: co-operatives, democracy, efficiency, corporate governance, Mondragon, Finland

JEL Classification: G340, L25, P0, P13

Suggested Citation

Jones, Derek C. and Kalmi, Panu, Economies of Scale Versus Participation: A Co-Operative Dilemma? (December 21, 2012). Journal of Entrepreneurial and Organizational Diversity, Vol. 1, No. 1 (2012), 37-64. Available at SSRN: https://ssrn.com/abstract=2194291

Derek C. Jones (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States
315-859-4381 (Phone)
315-859-4477 (Fax)

Panu Kalmi

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

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