Service Report 18

Cooperative Theory:  New Approaches

ABSTRACT

COOPERATIVE THEORY: NEW APPROACHES, edited by Jeffrey S. Royer, Cooperative
Management Division, Agricultural Cooperative Service, U.S. Department of
Agriculture.

This report contains nine papers on cooperative theory relating to operations, market behavior, decisionmaking, finance, and other aspects of farmer cooperation. These papers were written as part of an ACS project intended to stimulate research and thinking on practical aspects of cooperative theory. This report does not represent an exhaustive theory of cooperatives, but presents new approaches to thinking on several topics. In addition to answering some questions, these papers ask others in an attempt to encourage more thought.

Key words: cooperatives, cooperative theory, cooperative principles, operating procedures, methodology, structure, behavior, economic coordination, collective action, markets, decisionmaking, competition, finance.

ACS Service Report 18
July 1987

FOREWORD

Since Ivan Emelianoff's dissertation on the "Economic Theory of Cooperation" in 1942, a number of U.S. researchers have made contributions toward further developing a theory of cooperation. These contributions often have come in waves as concerted efforts have been made to strike new directions, or to formulate refinements to the evolving economic theory of cooperation. Notable waves of activity can be identified with Frank Robotka (1947) and Richard Phillips (1953) at Iowa State University; Sidney Hoos and Peter Helmberger at the University of California (1962); Peter Helmberger and James Youde at the University of Wisconsin (1966); and George Ladd and Jeffrey Royer at Iowa State University (1978). Others also have made individual conceptual contributions such as those by Aaron Sapiro and E. G. Nourse, which predate Emelianoff, and subsequent refinement by writers at various stations on a more sporadic basis.

As various researchers have made contributions to an evolving theory of cooperation, significant changes have been occurring in the size, complexity, and direction of the cooperative business institution itself. A number of regional cooperatives have evolved into complex, multipurpose, multistate industrial organizations. Theories developed for single-purpose local cooperatives are found wanting in conceptualizing activities of these complex organizations. At the same time, management schools have advanced various behavioral, game, and other theories that have potential application to cooperative businesses and ultimately to an extended cooperative theory.

It is with these facts in mind that a need was perceived for refocusing attention of researchers upon cooperative theory. The Agricultural Cooperative Service-USDA served as a catalyst to augment this probe through cooperative research agreements with a number of universities to encourage further research. The papers found herein represent the product of these theoretical investigations. Together they represent the latest "wave" of probings into the evolving theory of cooperation.

Work does not stop here but must be encouraged to continue. This proceeding represents efforts toward pushing the frontiers of knowledge on this business form toward new heights.

Randall E. Torgerson
Administrator
Agricultural Cooperative Service

PREFACE

The nine papers contained in this report were written as part of an ACS project intended to stimulate research and thinking on cooperative theory. ACS invited researchers interested in conducting studies on cooperative theory to submit research proposals. These papers are the result of research agreements between ACS and the University of Connecticut, Michigan State University, the University of Missouri-Columbia, and Virginia Polytechnic Institute and State University.

The project consists of three phases. In the first, the authors met as a group several times to discuss important cooperative problems and theoretical perspectives. The participants of these discussions wrote numerous working papers based on this interaction and input from colleagues, ACS researchers, and cooperative leaders. These working papers were freely exchanged for further discussion and criticism.

In the second phase, the authors met once again--to plan the contents of a "book of essays" on cooperative theory and assign themselves the topics represented in this report. The nine papers contained herein benefit greatly from the working papers and the cross-fertilization stimulated by them. After the authors wrote the papers in this report, the papers were circulated for further input and the authors had the opportunity for revision. Each paper was reviewed by at least two other authors and an ACS researcher.

In the third phase of the project, ideas from these papers and the working papers are to be integrated into an ACS research report useful to cooperative managers and directors. John Staatz of Michigan State University currently is working at this task.

We appreciate the efforts of the authors, who worked hard and thoughtfully on the papers contained in this report:

  Andrew M. Condon, University of Vermont
    Ronald W. Cotterill, University of Connecticut
             V. James Rhodes, University of Missouri-Columbia
  James D. Shaffer, Michigan State University
John M. Staatz, Michigan State University

We also extend our appreciation to these ACS reviewers for providing their valuable time: James R. Baarda, K. Charles Ling, Thomas H. Stafford, Donald W. Street (now with the Foreign Agricultural Service of USDA), and Bruce L. Swanson. These ACS employees spent time cleaning up the manuscripts after they were converted to our word-processing system: Deborah Cooper, Loraine Hill, Nellie Jones, and Greer Ross. Mary Hoke did the final formatting and prepared the camera-ready copy. I also would like to thank Charles Kraenzle, who reviewed many of the manuscripts and helped coordinate the project, and Gene Ingalsbe, who provided technical editing and advice. Finally, we acknowledge the efforts of Eileen van Ravenswaay of Michigan State University, who was an early participant in this project and contributed working papers and constructive reviews, and Peter Vitaliano of the National Milk Producers Federation, who while at Virginia Tech provided early leadership for the project and helped coordinate the reviews.

Jeffrey S. Royer
Editor

Contents

THE METHODOLOGY AND REQUIREMENTS OF A THEORY OF MODERN COOPERATIVE ENTERPRISE (pdf format)
Andrew M. Condon

THE STRUCTURAL CHARACTERISTICS OF FARMER COOPERATIVES AND THEIR BEHAVIORAL CONSEQUENCES  (pdf format)
John M. Staatz

THINKING ABOUT FARMERS' COOPERATIVES, CONTRACTS, AND ECONOMIC COORDINATION  (pdf format)
James D. Shaffer

FARMERS' INCENTIVES TO TAKE COLLECTIVE ACTION VIA COOPERATIVES:   A TRANSACTION COST APPROACH  (pdf format)
John M. Staatz

COOPERATIVES AND CONTESTABLE/SUSTAINABLE MARKETS  (pdf format)
V. James Rhodes

A GAME-THEORETIC ANALYSIS OF DECISIONMAKING IN FARMER COOPERATIVES (pdf format)
John M. Staatz

COMPETITION AMONG COOPERATIVES  (pdf format)
V. James Rhodes

LARGE AGRICULTURAL COOPERATIVES:  ON THE ROAD TO WHERE?  (pdf format)
V. James Rhodes

AGRICULTURAL COOPERATIVES:  A UNIFIED THEORY OF PRICING, FINANCE, AND INVESTMENT  (pdf format)
Ronald W. Cotterill