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Economics, General, Management

The creation of cooperative societies: an area to develop during this year 2012

One could not have chosen a more significant date in this blog to address the issue of cooperative societies. The reason is because the year that just commenced (2012) has been established by the United Nations as the International Year of Cooperatives. As a result of this event, several web resources appeared focused on the promotion of cooperative societies. According to Gui (1991) and Hansmann (2000), we can define cooperatives as those organizations in which owners and users of the services of the firm match, i.e. the owners of the firm themselves are the ones who receive the benefits created by the firm. Among the web resources that can be found on the Internet is www.stories.coop, in which a new story about a cooperative is displayed every day. Other resources will appear throughout this year. From here on I encourage you to bear in mind www.2012.coop, the web of reference during this International Year of Cooperatives, onto which the resources and activities to be performed in this year will be uploaded.

Regarding the area of interest of this post, the creation of cooperative societies, has been recognized by the European Union as a field to enhance in the future Treaties. The European Commission highlights the importance of the creation of cooperatives for three main reasons: 1) the cooperatives may be a means of building or increasing the economic power of Small and Medium-sized Enterprises (SMEs) in the market; 2) the cooperative is a means of providing high quality services to people that would otherwise not be able to access them because their supply is not attractive to profit driven companies; and 3) the cooperatives help to build  a knowledge-based society and act as schools of entrepreneurship and management for those who might not otherwise have access to positions of responsibility (COM (2004) 18 of 23.2.2004).

In Spain, more than 200 worker cooperatives were annually created between the years 1995 and 2010 (Díaz-Foncea and Marcuello, 2010), which places this country above other countries in the European area such as France (where according to Perotin, 2006, 138 worker cooperatives were created per year between 1971 and 2002), United Kingdom (where 132 workers cooperatives were created per year between 1976 and 1985, according to Podivinsky and Stewart, 2007) or Israel (where 22 cooperatives were created per year between 1951 and 1988, according to Russell and Hanneman, 1992). Regarding the results of my dissertation, which is focused on the Spanish context, factors that positively affect the creation of the cooperative societies are related to the unemployment rate, the cooperative culture in the community, the salary level and the educational level. Other studies in this area (Perotin, 2006; Staber, 1993; Russell and Hanneman, 1992) found similar results.

Comparing these results with those obtained for the capitalist firms, the rate of unemployment and wage levels obtained opposite results (negative influence on the creation of capitalist firms), in the same way that the existence of a strong sector services in the economy, the high population density and the arrival of periods of economic crisis like the present. Instead, these businesses are particularly driven by the growth of GDP, which has a positive influence. These results demonstrate that the factors that encourage the creation of cooperatives are different from those of other type of firms, and, moreover, these factors are not linked to periods of economic recession, but rather that the capitalist enterprises are the ones more affected by an unfavorable economic situation.

However, one should not confuse the creation of cooperatives with the promotion of the cooperative movement. In the Spanish case, where the legal form of cooperative society exists with full commercial capabilities in itself, we found that the main reason for creating a cooperative is not the intention of doing other way of business according to the cooperative principles  (more collaborative, democratic, etc.), but the main reason is the recommendation of the legal consultancy. This recommendation is based on both the exploitation of the subsidies that the cooperatives receive from the Administration and the advantages of the legal regulation, more lax than in the case of capitalist firm.

For these reasons, increased public awareness is needed about the goodness of the features of cooperatives and about their benefits for society as a whole. Another way of doing business is needed to give a coherent and efficient response to the crisis (in plural) in which we live. This year 2012 is a good time for this, using the activities prepared for the International Year of Cooperatives.

International Year of Cooperatives Video Clip 2012

References

COMMISSION OF THE EUROPEAN COMMUNITIES (2004): Communication from the Commission to the Council and the European Parliament, The European Economic and Social Committee of Regions: on the promotion of co-operative societies in Europe, Brussels, 23/2/2004 COM (2004) 18. Available at http://bit.ly/zRqPgl.

Díaz-Foncea, M. and Marcuello, C. (2010): La creación de sociedades cooperativas en España y Aragón: Un enfoque desde la oferta, XIII Jornadas de Investigadores en Economía Social y Cooperativa, CIRIEC – España, Zaragoza, España.

Gui, B. (1991). The Economic Rationale for the ‘Third Sector’. Non-profit & other Non-capitalist  Organizations. Annals of Public & Cooperative Economics 62(4), 551-572.

Hansmann, H. (2000). The Ownership of Enterprise. Cambridge, MA: Harvard University Press.

Perotin, V. (2006): Entry, exit and the business cycle. Are cooperatives different? Journal of Comparative Economics 34, 295–316.

Podivinsky, J. M. and Stewart, G. (2007): Why is labour-managed firm entry so rare? An analysis of UK manufacturing data, Journal of Economic Behavior and Organization 63, 177–192.

 

Millán Díaz-Foncea is a PhD student at the University of Zaragoza, in Spain. The objective of the his thesis is to analyze the key factor of emergence of cooperative societies from a regional and dynamic perspective and to study the socio-demographical, psychological and motivational characteristics of cooperative entrepreneurs. This is one will be carried out from literature about institutional and financial factors, as well as difficulties of collective decision-making and scarcity of incentives by workers. The empirical analysis is focused in Spain from 1950 to 2008. Email contact: millan @unizar.es

About emesphdnetwork

EMES is a research network of established university research centres and individual researchers whose goal is to gradually build up a European corpus of theoretical and empirical knowledge, pluralistic in disciplines and methodology, around “Third Sector” issues.

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  1. Pingback: Co-op news round up. « Arizona Cooperative Initiative - February 2, 2012

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