Co-operation as Co-ordination Mechanism: A New approach to the Economics of Co-operative Enterprises

Orthodox economic approaches fail to offer an interpretation of co-operative enterprises consistent with their nature and with a large amount of empirical evidence. Their shortcomings depend on at least three factors: (i) the assumption that there are only two mechanisms for coordinating economic agents, namely market and authority. In this chapter we add a third one, that is spontaneous co-operation; (ii) the exclusive relevance given to self-interested motivations in economic transactions; (iii) a conception of entrepreneurial action that is reduced to a nexus of contracts informed exclusively by gain from trade and the profit motivation. To overcome these limitations, we combine institutionalist, behavioral and evolutionary economics in giving a central role to intrinsic motivation, trust and fairness rules in organizational behavior and evolution. The enterprise is considered fundamentally as collective action in the pursuit of mutual and social benefit objectives. Co-operative enterprises are explained as the organizational form in which spontaneous co-operation becomes dominant, though not necessarily exclusive. This helps explain their different working rules and governance.