Social interactions and product quality: the value of pooling in cooperative entrepreneurial networks
- 351 Downloads
Why do cooperatives often pay a pooled price, despite the free-riding incentives it entails? In this paper, we highlight that a cooperative is an enterprise owned by a network of entrepreneurial members. By taking explicitly into account the social interactions among entrepreneurial members and the impact of social ties on members’ product quality provisions, we identify the circumstances when pooling is efficient. It is shown that social interactions mitigate the free-riding effect of pooling and that the amount of members’ social interactions depends upon, and increases with, the cooperative’s pooling ratio. We show that the complete pooling policy is not only economically efficient but also socially advantageous when the context of the cooperative is conducive to frequent social interactions among members.
KeywordsSocial capital Social interaction Cooperatives Pooling policy
JEL classificationD21 L23 Q13
- Bijman, J. (2010). Agricultural co-operatives and market orientation: a challenging combination? In A. Lindgreen, M. Hingley, D. Harness, & P. Custance (Eds.), Market orientation, transforming food and agribusiness around the customer (pp. 119–136). Aldershot: Gower Publishing Limited, Surrey.Google Scholar
- Bijman, J., Iliopoulos, C., Poppe, K. J., Gijselinckx, C., Hagendorn, K., Hanisch, M., et al. (2012). Support for Farmers’ Cooperatives, Final Report. Wageningen: Wageningen University. http://edepot.wur.nl/245008. Accessed 20 Jan 2017.
- Cropp, R., & Ingalsbe, G. (1989). Structure and scope of agricultural cooperatives. In D. Cobia (Ed.), Cooperatives in agriculture (pp. 35–67). Englewood Cliffs: Prentice Hall.Google Scholar
- Deng, W. (2015). Social capital and diversification of cooperatives. Ph.D. Thesis, EPS-2015-341-ORG, ISBN 978-90-5892-398-1, Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands. http://repub.eur.nl/pub/77449.
- Deng, W., & Hendrikse, G. W. J. (2013). Uncertainties and governance structure in incentives provision for product quality. In T. Ehrmann, J. Windsperger, G. Cliquet, & G. W. J. Hendrikse (Eds.), Network governance: alliances, cooperatives, and franchise chains (pp. 179–203). Heidelberg: Physica.CrossRefGoogle Scholar
- Goyal, S. (2007). Connections: an introduction to the economics of networks. Princeton: Princeton University Press.Google Scholar
- Granovetter, M. (1985). Economic action and social structure: the problem of embeddedness. American Journal of Sociology, 91(3), 481–510.Google Scholar
- Hendrikse, G.W.J., & Feng, L. (2013). Interfirm cooperative. In: Grandori, A. (Eds.), Handbook of economic organization: integrating economic and organization theory (pp. 501–521). Cheltenham: Edward Elgar Publishing Ltd. Google Scholar
- ICA. (2014). International Co-operative Alliance. http://ica.coop/en/facts-and-figures.
- Liang, Q. (2013). Governance, CEO Identity, and Quality Provision of Farmer Cooperatives. Ph.D. Thesis, EPS-2013-281-ORG. Rotterdam: Rotterdam School of Management, Erasmus University. https://repub.eur.nl/pub/39253/. Accessed 20 Jan 2017.
- MoA. (2014). Ministry of Agricultural of the People of Republic of China. http://www.moa.gov.cn/.
- Peng, X., Hendrikse, G. W. J., & Deng, W. (2016). Communication and innovation in cooperatives. Journal of the Knowledge Economy. doi: 10.1007/s13132-016-0401-9.
- Peterson, H. C., & Anderson, B. L. (1996). Cooperative strategy: theory and practice. Agribusiness, 12(4), 371–383. doi: 10.1002/(SICI)1520-6297(199607/08)12:4<371::AID-AGR7>3.0.CO;2-W.CrossRefGoogle Scholar
- Rotemberg, J. (2006). Altruism, reciprocity and cooperation in the workplace. In S-C., Kolm, & J.M., Ythier (Eds.), Handbook of the economics of giving, altruism and reciprocity, volume 2 (pp. 1371–1407). Amsterdam: Elsevier B.V.Google Scholar
- Staatz, J.M. (1987). The structural characteristics of farmer cooperatives and their behavioral consequences. In J.S., Royer (Eds.), Cooperative Theory: New Approaches, Service Report 18 (pp. 33–60). Washington: USDA Agricultural Cooperative Service.Google Scholar
- Turner, J. H. (1999). The formation of social capital. In P. Dasgupta & I. Serageldin (Eds.), Social capital: a multifaceted perspective (pp. 94–146). Washington: The World Bank.Google Scholar
- Van Dijk, G. (1997). Implementing the sixth reason for co-operation: new generation cooperatives in agribusiness. In J. Nilsson & G. van Dijk (Eds.), Strategies and structures in the agro-food industries (pp. 94–110). Assen: van Gorcum.Google Scholar