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Cooperatives 2019-01-31T23:47:04+00:00

Voluntary Marketing Institutions: Cooperatives

A crucial component of CORMEC is its connection with businesses both in and outside the agricultural complex. Industry stakeholders are connected by means of specific, applied research but also participate actively in designing and implementing risk management instruments and strategies. Cooperatives are formed (in most cases) on a voluntary basis. Producers become members of cooperatives for gaining market access and improve their bargaining power and welfare. They play an important part both as clients and catalysts for further scholarly and applied research.

Cooperatives provide high resistance in times of crises and play a crucial role in all segments of the economy (e.g., agriculture, banking, insurance, healthcare and services) and society (e.g. enhancing solidarity). In this volatile age, cooperatives and their members are increasingly exposed to financial risks. How can a cooperative expand and respond to current market challenges? How can a cooperative restructure its organizational design and cope with internal relational issues among its member firms? How can a cooperative improve its performance and maximize its member surplus? How can a cooperative create value for its members through risk management? Not only individual entrepreneurs (as members of a cooperative), but also more and more cooperative managers and policy makers themselves are struggling with these issues. As a result, they express a strong need for more expertise in this area, namely, the crossroads between risk management and corporate governance.

Due to these developments, cooperatives play an important role in CORMEC’s activities, as demanding parties themselves (for applied research into risk management for their own organization), but also as channels for “grass-roots” demand from their membership, where individual entrepreneurs are creating product groups and are working on risk management themselves, guided by CORMEC.

CORMEC specialist Dr. Nikos Kalogeras is eager to share what he has learned over the years with stakeholders in food, agribusiness, and financial services cooperatives. Moreover, he believes that a marketing-finance approach should be adopted in order to holistically analyze the ownership structure, corporate governance, allocation of members’ benefits, and the strategic focus of cooperatives.

The Cooperative Life Cycle – an approach

Multiple, often conflicting, theories regarding success and failure of collective action exist. The life cycle framework of patron-owned collective action in the agricultural sector can be used as a systematic method of deciding when to selectively apply relevant theories of collective action. Prof. Dr. Michael L. Cook et. al. has extensively researched this topic, and put forward five distinct phases within the cooperative life cycle model:

Phase 1 = Justification

Phase 2 = Organizational Design

Phase 3 = Growth–Glory–Heterogeneity

Phase 4 = Recognition and Introspection

Phase 5 = Choice

A dynamic framework appears to better inform the cooperative degeneration hypothesis and suggest actions cooperative leaders may take to avoid checkmate. After outlining endogenous reasons for decline, one can look at heterogeneity and vaguely defined property right problems as opportunities for gathering information critical to survival. Cooperative decision-makers possessing an intimate understanding of the dynamics of cooperative growth are in a unique position to evade ownership costs by selecting among regenerative solutions when faced with organizational decline.

Please click here for the Life Cycle Explanation of Cooperative Longevity paper by Prof. Cook (2018).

More research on the cooperative life cycle can be found here.

In 2017, Prof. Michael Cook, Prof. Constantine Iliopoulos and  Prof. Joost Pennings delivered an executive course in the Netherlands that revolved the Cooperative Life Cycle. The course flyer can be found here.

Below you can find a video on the interface of cooperatives and risk management: