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What Makes Cooperatives Successful? Identifying the Determinants of Their Organizational Performance

Published online by Cambridge University Press:  12 September 2018

Patrizia Fanasch  and
Bernd Frick
Patrizia Fanasch*
Affiliation:
Paderborn University, Management Department, Warburger Strasse 100, 33098 Paderborn, Germany
Bernd Frick
Affiliation:
Paderborn University, Management Department, Warburger Strasse 100, 33098 Paderborn, Germany; and Castle Seeburg University, Department of Sport Economics and Sport Marketing, Seeburgstrasse 8, 5201 Seekirchen/Salzburg, Austria; e-mail: bernd.frick@uni-paderborn.de.
*
e-mail: patrizia.fanasch@uni-paderborn.de (corresponding author).
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Abstract

In comparison with other organizational forms, cooperatives have been found to offer poor product quality and suffer from low reputation. The main reasons discussed in the literature are information asymmetries, which leads to adverse selection and moral hazard, as well as the absence of profit orientation due to poorly specified and diluted property rights. However, although, in reality, many cooperatives indeed perform poorly, and some are apparently able to completely avoid or at least reduce the problems that are considered prototypical for this hybrid organizational form. Therefore, the purpose of this study is to identify the characteristics required to reduce the problems resulting from poorly specified property rights and information asymmetries and, hence, to successfully compete in the market. The data we use to identify the characteristics that separate “good” and “bad” cooperatives encompass 136 organizations in Austria, Germany, and northern Italy. Our logistic regression estimations show that older and larger cooperatives (in terms of acreage) have a significantly higher probability to be listed in at least one of two highly respected wine guides. Moreover, German cooperatives have a significantly lower probability of being listed than either Austrian or northern Italian cooperatives. The findings suggest that differences in performance can be explained by the management of cooperatives. (JEL Classifications: D23, D82, D86, J54, L22, L25, L66, P13, Q13)

Keywords

adverse selectioncooperativesfirm performancemoral hazardproperty rightswine industry
Type
Guest Editor Günter Schamel: Symposium “Organization and Performance of Cooperative Firms in the Wine Sector”
Information
Journal of Wine Economics , Volume 13 , Issue 3 , August 2018 , pp. 282 - 308
Copyright
Copyright © American Association of Wine Economists 2018 

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Footnotes

We are indebted to an anonymous reviewer for comments and suggestions that helped to improve the paper. We also thank the participants at the AAWE Workshop in Bolzano 2017 and especially Christoph Weiss for their feedback. Moreover, we are particularly grateful to Günter Schamel for providing additional data. Any remaining errors or omissions are the responsibility of the authors.

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