Abstract
Prior work assessing cooperative performance focuses mostly on available financial accounting measures commonly used to evaluate investor owned firms. Here, we advance a more inclusive approach, which incorporates several aspects of performance consistent with the dual objectives of the cooperative form. We demonstrate that cooperative performance consists of multiple dimensions and that a survey item about overall performance adequately reflects variation in each of these dimensions of performance across cooperatives. Hence, this item may be used to compare performance across cooperatives with reasonable confidence. Though comparisons of cooperative financial statistics may be misleading when considered alone, future work that simultaneously assesses these statistics along with other dimensions of performance may provide insight into tradeoffs cooperatives make—sacrificing on one performance attribute for better performance on another. The degree of correspondence among these aspects of performance appears to vary by cooperative type. For instance, multipurpose cooperatives using cost of goods sold accounting behave more like IOFs in terms of financial performance than marketing cooperatives, which are predominately concerned with paying patron-members the highest possible prices for their products and generally use a pooling approach to accounting.
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- 1.
Early studies support theoretically expected deficiencies in financial performance for farm supply and dairy and grain cooperatives in the U.S. (Chen et al. 1985; Schrader et al. 1985). Following a transformation of the cooperative model entailing adoption of some characteristics and practices of IOFs (Chaddad and Cook 2004; Gentzoglanis 1997; Kalogeras et al. 2013), more recent studies find little difference in the financial performance of cooperatives and IOFs in various agricultural sectors of the U.S. (Hardesty and Salgia 2004; Lerman and Parliament 1990; Ling and Liebrand 1998; Parliament et al. 1990), Canada (Gentzoglanis 1997), and the U.K. (Hind 1994). The recent results seem consistent with the theoretical role of cooperatives in providing a competitive yardstick in regions where they coexist with IOFs (Sexton 1990).
- 2.
Ling and Liebrand (1998) introduced the extra value index (EVI) to account for opportunity costs of member equity in a profitability ratio. We utilize the same method as Liebrand (2007) to calculate EVI: EVI = (Net Income after Taxes–[(Total Equity) × (LIBOR 12 month maturity December average + 2 %)])/(Total Assets–Current Liabilities). To estimate an interest surcharge, we add 2 % to the 12-month maturity December average of the London Interbank Offered Rate (LIBOR). We multiply this surcharge by total equity to calculate the opportunity cost of capital for members. This opportunity cost of capital is subtracted from net income after taxes; we then divide by total assets less current liabilities.
- 3.
A low Chi-square statistic per degree of freedom (χ2/df), and a corresponding insignificant p-value indicate that actual and predicted input covariance matrices are not statistically different (Pennings and Leuthold 2000). The Tucker Lewis Index (TLI) accounts for parsimony in a comparative index between the proposed and null models, with recommended values of 0.9 or greater (Hair et al. 1995). Root Mean Squared Error of Approximation (RMSEA) reflects how well a fitted model approximates the population covariance matrix, with values below 0.08 indicating a close fit (Browne and Cudeck 1986).
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Acknowledgement
This research received funding from the USDA under Cooperative Research Agreement RBS-09-40. We also acknowledge the detailed and enthusiastic responses of survey participants and the helpful comments of an anonymous reviewer.
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Franken, J.R.V., Cook, M.L. (2015). Informing Measurement of Cooperative Performance. In: Windsperger, J., Cliquet, G., Ehrmann, T., Hendrikse, G. (eds) Interfirm Networks. Springer, Cham. https://doi.org/10.1007/978-3-319-10184-2_11
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