In many countries and industries, cooperatives constitute a significant share of activity. Despite this widespread presence, there is little evidence on the merits of this organizational form with respect to productive efficiency relative to the more dominant way of organizing production through investor-owned firms.
In this paper, we contribute towards answering the long-standing question of whether cooperatives are more or less efficient than investor-owned firms by providing empirical evidence from Portugal. Portugal offers a good study ground because of existing rich panel data covering a wide range of industries and because cooperatives (of all types) are widely represented across a number of different industries. This allows us to make a cross-industry comparison of a kind that is very rare in the literature.
The overall picture emanating from our study is that productive efficiency tends to be higher for investor-owned firms than for cooperatives, though our results are somewhat sensitive to the choice of econometric model. Importantly, we find no evidence, in any industry, that cooperatives outperform investor-owned firms. Furthermore, our results reveal that the relative performance of cooperatives is fairly consistent across different industries with very different representation of cooperatives in terms of type, such as worker cooperatives and producer cooperatives. This might indicate that the relative underperformance of cooperatives is related to agency problems between owners and managers, which are intrinsic to the cooperative organizational form, regardless of type.
Click here to go to the paper by Natalia P. Monteiro and Odd Rune Straume.