Cooperative Enterprise

Cooperative Enterprise

Facing the Challenge of Globalization

Stefano Zamagni and Vera Zamagni

This eloquent book analyses the theory of the cooperative form of enterprise from an historic perspective, whilst assessing its appeal in the current economic environment.

Chapter 6: The Economic Performance of Cooperative Enterprises

Stefano Zamagni and Vera Zamagni

Subjects: economics and finance, economic psychology


6.1 THE NEOCLASSICAL APPROACH Now that we are familiar with the history and the identity of the cooperative enterprise, the question is whether it can truly compete with the capitalist firm in the marketplace. Answering this question means trying to determine the strengths and weaknesses of the two forms of enterprise. Virtually the entire literature devoted to such a comparison over the past half-century has taken as the gauge of their relative performance the standard one of ‘efficiency’. Obviously this choice is precisely grounded. If in the long run in a market economy only efficient enterprises can survive the process of selection, then determining which form is more efficient is tantamount to determining the factors that predict the long-run success of one or the other. How is this methodological choice translated into practice? The first point is that an enterprise is a coalition of persons supplying the inputs needed for a given production process, whose output is sold in the market. Since the relationships between these persons and the enterprise itself are governed by inherently incomplete contracts, it follows that some of them must be assigned the task of overseeing production activity. Let us assume, for simplicity, that the only ones who can perform this task are the suppliers of capital and the suppliers of labour (for the sake of brevity the others, such as the suppliers of raw materials or consumers, are left out, but the logic of the argument is in no way affected). Whichever economic agent is...

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