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This paper tries to identify under which conditions increasing market competition may help cooperatives to improve technical efficiency to guarantee positive profits. This hypothesis is first formalized in a partial equilibrium framework and then is tested on a sample of Italian conventional and cooperative firms, using frontier analysis. Technical efficiency indexes are computed by using the one-stage approach as suggested by Battese and Coelli (1995), where proxies for competition are introduced as determinants of efficiency, along with other exogenous factors accounting for the firms’ heterogeneity. However, the overall impact of increasing competition on efficiency is negative.

This volume of Advances in the Economic Analysis of Participatory and Labor Managed Firms is the tenth in the series. The series began in 1985 and until 1998 six volumes appeared. Then the series was published by JAI and Jan Svejnar and I were co-editors. The series was re-launched in 2003 when volume 7 (edited by Takao Kato and Jeffrey Pliskin) appeared as the first volume to be published by Elsevier. Subsequent volumes, both published by Elsevier, were edited by Virginie Perotin and Andrew Robinson (volume 8, 2004) and by Panu Kalmi and Mark Klinedinst (volume 9, 2006.)

A number of competing views are swirling around the literature concerning the impact of globalization on the ability of cooperatives to survive. Some argue that globalization provides co-ops with the incentives to improve their own performance and to better compete with conventional firms, while others maintain that globalization pushes co-ops out of the market. Others contend that the most efficient co-ops are those that gain a larger market share and thus are able to affect the state of competition in the product market.

It may be useful to begin this discussion with a brief history of the subject; not the whole history starting from Buchez, the Utopians and Rochdale, but the more recent history beginning after the Second World War. Following that war the winning systems were both capitalist systems, one based on private capital ownership, the second based on state capital ownership. That is, both systems were seeking to serve the interests of capital – one that of the private owners, the other the interest of the state – as if the workers were just a resource to serve capital. More concretely, especially with respect to the western private capitalism, the system worked as if profits were to be maximized, that is the incomes and well being of the workers were to be minimized.

Existing theoretical and empirical evidence is inconclusive concerning the comparative performance of labor-managed firms (LMFs) and conventional firms. By assembling and analyzing new data for a sample of 51 conventional firms and 26 producer cooperatives in the Italian construction industry during the period 1981–1989 we provide additional evidence. Except for organizational form, the cooperatives in our sample are fairly comparable to our conventional firms. Based on our production function estimates, and unlike some previous econometric studies, we find no significant productivity advantage of cooperatives over conventional firms. Our ordinary least squares (OLS) point estimates generally indicated that output would be lower in a cooperative than in an otherwise identical conventional firm. The only statistically significant measure of financial and decision-making participation is collective reserves. We conclude by offering some possible explanations for why our results may differ from some previous findings, especially those for Italian producer cooperatives. In particular we suggest that research methods that are new to the study of cooperatives are needed to help to resolve these questions.

This paper analyses the mechanisms through which profit-sharing schemes may induce debt constrained firms to improve technical efficiency over time to guarantee positive profits. This hypothesis is first formalised in a partial equilibrium framework and then is tested on a sample of Italian traditional and cooperative firms. Technical efficiency change indexes are computed by DEA. These are regressed on a measure of finance constraints to analyse their impact on firms’ efficiency growth. The results support the hypothesis that a restriction in the availability of financial resources can affect positively the growth in efficiency in firms with profit-sharing schemes.

In Canada, grain handling is an important agri-business that has traditionally been cooperative in nature (for example, Saskatchewan Wheat Pool). At the same time the industry is heavily regulated. There has been a dramatic change in the structure of the industry over the past 20 years and there are currently no major cooperatives present in the market. If the “yardstick effect” hypothesis of the role of cooperatives in an imperfectly competitive market is true, the disappearance of cooperatives could result in the ability of remaining firms to exercise market power over producers. To investigate the impact of changes in ownership structure in the market, we estimated two types of pricing games that might have been played between a cooperative, Saskatchewan Wheat Pool (SWP) and an investor-owned firm (IOF), Pioneer Grain (PG) in the Saskatchewan wheat-handling market over the period 1980–2004, with different assumptions about their pricing behavior imposed. We find that SWP and PG have likely been playing a Bertrand pricing game in the market over the period. We thus conclude that SWP, as the largest cooperative in the market, likely played a “yardstick effect” role in the market.

This study analyses and presents the main differences that exist in the quality of management as practised by Cooperative and Non-Cooperative companies in the Basque Country within the industrial and company services sectors. The results obtained suggest that the quality level of cooperative company management is higher than that shown in the non-cooperative sector, the principal differences in quality of management being related to aspects where the social commitment of a company is reflected. These results prove to be more conclusive within the subgroup of cooperatives that are incorporated within the Mondragon Cooperative Corporation (MCC).

The literature on labor-managed firms identifies the source of under-capitalization in the Furubotn–Pejovich effect. Appropriable capital accounts can counteract the horizon problem, but they engender little-examined problems connected with the distribution, reinvestment, and reimbursement of net surpluses. This paper proposes that the introduction of cooperative bonds would provide a better match between the horizons of members and their firms. However, bonds generate risks of their own due to capital variability, thus requiring the imposition of various constraints and the retention of appropriate levels of collective reserves. Finally, a hierarchy of liabilities is proposed to protect parties who undergo information disadvantages.