Generic solutions to coordination and organizational costs: informing cooperative longevity

Abstract

For years, scholars and policy makers have ar gued that cooperatives, particularly agricultural cooperatives, exhibit organizational inefficiencies primarily caused by individual member behavior that is often independent and non-cooperative conflicting with the formation of effective coalition building. This free riding tendency creates significant challenges for a continued joint collaboration between and among member patrons. Yet, agricultural cooperatives have a long history of surviving as successful business enterprises. This paper presents a framework that proposes generic solutions effective as design principles in addressing the negative consequences of high organization costs, thus leading to sustainable common group interest activities.

A Life Cycle Explanation of Cooperative Longevity

“…Generally, these actions move the organization toward reducing costly consequences of frictions. These solutions usually fit within one of four generic categories of solutions, (a) user alignment; (b) member retention; (c) supply/demand balancing; and (d) transparency solutions [1]. This modification and/or process is called "tinkering".…”

“…In every session, the LCF concept was evaluated and modified with the insights and suggestions from more than 5000 participants. Concepts such as multiple life cycles, tinkering, member heterogeneity, subgroup frictions, simmering factions, cooperative genius, and specific solutions emerged from these interactive exchanges [1]. Over time, participants stressed the importance of having an outline or framework to guide the study of their own cooperative's evolution and history of dealing with the complexity of investment and control constraints unique to the cooperative organizational form.…”

“…During this phase 4 analysis period, root causes of these friction/fraction disturbances are identified, usually emanating from a set of unique cooperative structural characteristics embedded in capital constraints and control/governance policies and practices. Generic solutions in the form of realigning user incentives, policies balancing supply and demand, member retention investments and transparency practices have the potential to regenerate the level of cooperative health are also evaluated [1].…”

An Exploratory Study of Cooperative Survival: Strategic Adaptation to External Developments

“…While addressing the intra-cooperative relationships among members, directors, and managers is important (see [17]), farmer cooperatives must also consider the dynamic external environment if survival is the objective. Dual consideration of internal and external adaptation corresponds to the notion of co-evolution [18,19].…”

“…While dozens of farmer cooperatives exit each year by means of mergers, acquisitions, liquidations, and bankruptcies [16], why and how might others survive? Some researchers have informed solutions to internal inefficiencies [17], and there exist scattered…”