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The Relative Survival of Worker Cooperatives and Barriers to Their Creation

Sharing Ownership, Profits, and Decision-Making in the 21st Century

ISBN: 978-1-78190-750-4

Publication date: 9 December 2013



The purpose of this paper is to demonstrate that the conjecture that worker cooperatives (firms that practice participatory management and share profits broadly) suffer a competitive disadvantage relative to conventional firms is not supported by existing empirical research. It also considers alternative explanations for why such cooperatives are rare.


Historical analysis, literature survey, and survival analysis.


Studies of worker cooperatives in a variety of national settings indicate their failure rate is lower than conventional firms at least in the short and medium term. This contradicts the proposition that they are rare because they suffer a competitive disadvantage and focuses attention instead on their low formation rate.

Research limitations

The “liability of newness,” wealth and credit constraints, entrepreneurial rents, and collective action problems are cited as important barriers for the creation of worker cooperatives de novo, but these factors should be greatly reduced for those created through the conversion of an existing firm. Paradoxically, the overwhelming majority of cooperatives are created from scratch, and hence this explanation remains incomplete.

Practical implications

Existing policies incentivizing the creation of worker cooperatives, and current initiatives to promote them, do not encourage the creation of inferior economic institutions.


This paper contradicts the widely held belief that the distinctive features of worker cooperatives (participatory management and broadly shared profit) place them at a competitive disadvantage in a market economy. It also provides insight into why cooperatives are rare by challenging explanations based in presumed inefficiencies and focusing attention instead on barriers to creation.




Thanks go to Doug Kruse, Christopher Gunn, Virginie Pérotin, Al Campbell, and Robin Hahnel for insightful comments on drafts of this paper or helpful conversations about these issues. The paper has been greatly improved by their input. Any remaining errors are attributable to the author alone. This work was supported by the Joseph Cabral Distinguished Scholar and Fellow award from the Rutgers School of Management and Labor Relations.


Olsen, E.K. (2013), "The Relative Survival of Worker Cooperatives and Barriers to Their Creation", Sharing Ownership, Profits, and Decision-Making in the 21st Century (Advances in the Economic Analysis of Participatory & Labor-Managed Firms, Vol. 14), Emerald Group Publishing Limited, Leeds, pp. 83-107.



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