Motivation, Coordination and Cognition in Cooperatives

Cooperation among people dates back as far as human beings team up in production for mutual benefit. Modern cooperatives are founded also for members’ mutual economic and social benefit. Cooperatives differ from conventional firms in many aspects. They are owned by a group of suppliers or consumers, rather than investors in business corporations. This special kind of ownership leads to a distinct way of managerial motivation, production coordination and allocation of cognition. How do these differences influence the comparative advantage or disadvantage of cooperatives?

In her dissertation Motivation, Coordination and Cognition in Cooperatives, Li Feng compares the efficiency of cooperatives and a number of other organisational forms from various perspectives. She finds that a cooperative can indeed be a superior arrangement under certain conditions. Cooperatives’ management can benefit from this research when designing the performance measure, selecting a coordination mechanism and understanding the underlying reasons of cooperatives’ conservativeness.

Li Feng defended her dissertation on 3 December, 2010. Her promoter was <link people george-hendrikse _self>Prof.dr. G.W.J. Hendrikse, Professor of Economics of Organisation at RSM. Other members of the doctoral committee were Prof.dr. S. B. Neto, Prof. dr. K. Karantininis and Dr. E. Verwaal. Li Feng's dissertation was awarded cum laude by this committee.

About Li Feng

Li Feng (1983, China) studied international economics and trade at Wuhan University and received her bachelor degree in economics in 2004. She obtained a master degree in economics and business in 2006 at the Erasmus School of Economics, after which she joined the Department of Organisation and Personnel Management at Rotterdam School of Management, Erasmus University, as a PhD candidate. Since 2007 she has presented her work at various international conferences and workshops. Several of her papers have been published in books and conference proceedings.

Abstract of Motivation, Coordination and Cognition in Cooperatives

A cooperative is a firm collectively owned by many independent input suppliers or buyers. This dissertation examines the nature of a cooperative and its efficiency compared with other governance structures from the perspectives of motivation, coordination and cognition. First, a multi-task principal-agent model is developed to address the motivation issues in cooperatives. It captures that a cooperative is not publicly listed and that it has to bring the enterprise to value as well as to serve member interests. We find that the lack of public listing in cooperatives may result in the cooperative being the unique efficient governance structure under either one of two conditions: 1) additional sources of information like accounting information and subjective performance evaluations are available; 2) the upstream marginal product multiplied with a function increasing in the strength of the chain complementarities is higher than the downstream marginal product. Second, the impact of governance structure on the choice of coordination mechanism in a chain is investigated. The governance structures cooperative and IOF are distinguished. A cooperative as a coordination device is always efficient due to its prevention of double mark-up. Last, the dissertation attempts to gain a better understanding of the governance structure choice in a bounded cognition framework. The influence of governance structures (market, cooperative, forward integration, and backward integration) on the information partitions of boundedly rational agents is specified. Our characterization of the governance structures captures on the one hand the way they channel attention and cognition, and on the other hand the distinct ownership distributions. We show that each governance structure can be efficient, depending on the probabilities of the various states and the size of the potential benefit and loss. A cooperative enterprise’s conservativeness to change is explained.

To wrap up, the dissertation aims to deepen the current understanding of the cooperative as one governance structure out of many. It is compared with other governance structures from various perspectives. In doing so, the aim is to ease the doubt of some researchers regarding the efficiency of the cooperative and to identify the conditions under which cooperatives are efficient.