Motivation, Coordination and Cognition in Cooperatives

A cooperative is a firm collectively owned by many independent input suppliers or buyers. This dissertation examines the nature of a cooperative and its efficiency compared with other governance structures from the perspectives of motivation, coordination and cognition. We find that the lack of public listing in cooperatives may result in the cooperative being the unique efficient governance structure under either one of two conditions: 1) additional sources of information like accounting information and subjective performance evaluations are available; 2) the upstream marginal product multiplied with a function increasing in the strength of the chain complementarities is higher than the downstream marginal product. A cooperative as a coordination device is always efficient due to its prevention of double mark-up. The influence of governance structures (market, cooperative, forward integration, and backward integration) on the information partitions of boundedly rational agents is also investigated. We show that each governance structure can be efficient, depending on the probabilities of the various states and the size of the potential benefit and loss. A cooperative enterprise’s conservativeness to change is explained. In sum, the main objective of the dissertation is to deepen the current understanding of the cooperative as one governance structure out of many. It is compared with other governance structures from various perspectives. In doing so, I hope to ease the doubt of some researchers regarding the efficiency of the cooperative and to identify the conditions under which cooperatives are efficient.

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