The Firm as a Common. Non-Divided Ownership, Patrimonial Stability and Longevity of Co-Operative Enterprises

Abstract

Contemporary literature dealing with the governance and exploitation of common-pool natural resources was initiated by Elinor Ostrom in 1990, and has been growing fast ever since. On the contrary, within the same research stream, the study of the presence and economic role of common resources in entrepreneurial organizations is, to date, under-researched. This work endeavors to fill some theoretical gaps in this research perspective by: (i) spelling out a new-institutionalist framework for the analysis of the accumulation and governance of common capital resources within organizational boundaries; (ii) considering cooperative enterprises as the organizational form that, on the basis of historical record, and of behavioral and institutional characteristics, demonstrated to be most compatible with a substantial role for common and non-divided asset-ownership and with its governance thereof; and (iii) evidencing and explaining the theoretical connection between cooperative longevity and the presence of non-divided asset ownership. The economic forces influencing the optimal level of self-financed common capital resources in cooperatives are enquired. Conclusions to the paper evidence the main reasons why the new approach can better explain than preceding ones the economic sustainability and longevity of cooperative enterprises.

Cooperative Longevity: Why Are So Many Cooperatives So Successful?

“…Tortia provides a new institutional perspective on the observed extended longevity of cooperatives relative to other entrepreneurial forms [13]. He views non-divided asset ownership in cooperatives as being similar or identical to the management of common-pool resources.…”

Finance, Property Rights and Productivity in Italian Cooperatives

“…The net effect of these two opposing forces (undercapitalization and increased patrimonial stability) cannot be ex ante determined. It depends on several factors, including, but not limited to, the temporal horizon (Tortia, 2018). For example, the net effect depends on the increased potential for the cooperative to preserve its owned resources (both human and non-human) in negative economic contingencies, and to renew its membership by progressively including younger members (thus weakening the constraint represented by the truncated temporal horizon).…”

“…On the other hand, patrimonial stability may be a positive feature of collective ownership, since the capital of the enterprise cannot be shared and distribution of dividends is limited and strongly regulated by law, while the greatest part of positive net residuals is reinvested into indivisible reserves (Tortia, 2007). These institutional constraints force the creation of collective funds that can have an insurance function against the risk of lay-off and unemployment, and that can favour the preservation of the stock of human capital of the organization during downturns of demand (Tortia, 2018). Cooperatives may be able to internalize worker-specific effects that are not internalized optimally in capitalist enterprises.…”

“…Far from causing under-investments, under appropriate conditions, collective capital can have the function of completing the limited temporally horizon of workermembers in investment decisions and in the deployment of production plans. In this, governance, not economic incentives, is likely to have a more fundamental role in reaching efficient outcomes (Ostrom, 1990;Tortia, 2018).…”

“…This latter condition may not be problematic in declining industries and sectors, in which the disappearance of existing organizations can be a normal occurrence(Tortia, 2018). 2 Several proposals have been put forward for implementing quasi share financial instruments, but they will not be treated in this paper.…”