Jongick Jang
Hanshin University
Jongick Jang is an assistant professor at the Graduate School for Social Innovation Business and College of Global Cooperation in Hanshin University. In 1994 he established Korea Research Institute of Cooperatives where he devoted himself to contribute to reformation of government-controlled agricultural cooperatives, rejuvenation of credit union, and development of consumer cooperatives for 10 years. Thereafter, he studied his Ph.D program in University of Missouri and obtained Ph.D degree in applied economics with focusing on organizational economics and new institutional economics. Dr. Jang is editor of Korean Journal of Cooperative Studies, member of Council of Cooperative Policy in South Korea, and auditor of Federation of Hansalim. He has published dozens of papers and books regarding cooperatives, social enterprises, and economics of institutions.
Key words
Small entrepreneurs' cooperative, Free lancers' cooperative, Framework Act on Cooperative in South Korea, Hybrid organization
Survey of Literature
Cooperatives have been recognized as a countervailing vehicle for economic actors to avoid deadweight loss resulting from value-dissipating behavior of firms with market power(Sexton, 1990; Hansmann, 1996). The development of farmer cooperatives and consumer cooperatives since the late 19th century has been well understood in this point of view (Birchall, 1997; Spear, 2000). Cooperatives also have been justified as a value-enhancing mechanism through resolving information asymmetry prevalent in industries, including financial sector. Credit union or cooperative bank is a well-known example of cooperatives which has contributed to creating credit by replacing tangible collaterals with intangible ones such as peer monitoring or a mutual trust mechanism (Aghion and Morduch, 2010; Birchall, 2011).
However, studies on cooperative for small entrepreneurs or free-lancers in non-agricultural sector have been rarely found(Revensburg, 2011). This paper examines economic rationale for small entrepreneurs or free-lancers in non-agricultural sector to establish a cooperative. This issue is important in countries such as Korea where self-employment rate is 29% in 2012, which is much higher than OECD total of 16%. In addition, the issue also has been emerging in advanced countries where unemployment rate has been escalating and the number of free-lancers has been prevalent in sectors such as information and communication technology, scientific research, education, and etc. Small entrepreneurs' cooperatives or free-lancers' cooperatives have been major types of cooperatives that have been newly established since Framework Act on Cooperatives took effective in December 2012. Similarly, CAE(coopératives d'activités et d'emploi) have been increasingly appeared in France.
Research Questions
This paper addresses three main research questions as below. First, what is the nature of market inefficiency which have driven the recent new wave in establishment of cooperatives for small entrepreneurs or free-lancers? Second, how cooperative type of ownership structure or organizational structure resolves the market efficiency which small entrepreneurs or free-lancers face with? Finally, how the mechanisms utilized by cooperatives for small entrepreneurs or free-lancers are differentiated from those adopted by traditional cooperatives? What are the implications for the development of cooperative sector and social economy sector more broadly?
Methodology
This paper uses an exploratory analysis. Observations, focused-group interviews, survey data collected from South Korea cases, and secondary information are used to address the first and second question. The paper utilizes existing literature regarding organizational economics or organizational sociology to address the third question..
References
Aghion, B. and J. Morduch, 2010, The Economics of Microfinance, Cambridge, MA: MIT Press.
Birchall, J., 1997, The International Cooperative Movement, Manchester: Manchester University Press.
Birchall, J., 2011, People-Centred Businesses: Cooperatives, Mutuals and the Idea of Membership, London: Palgrave Macmillan.
Hansmann, H., 1996, The Ownership of Enterprise, Cambridge, Massachusetts: Harvard University Press.
Ravensburg, N. G., 2011, Economic and Other Benefits of the Entrepreneurs’ Cooperative as a Specific Form of Enterprise Cluster, Geneva: ILO.
Spear, R., 2000, "The Cooperative Advantage," Annals of Public and Cooperative Economics, 71(4): 507-523.
Staatz, J.M., 1987, "Farmers Incentives to Take Collective Action via Cooperative: A Transaction-Cost Approach," In Royer (ed.), Cooperative Theory: New Approach, USDA-ACS Service Report 18, Washington D.C. p 155-170.
Sexton, Richard J., 1990, "Imperfect Competition in Agricultural Markets and the Role of Cooperatives: A Spatial Analysis," American Journal of Agricultural Economics, 72: 709–720.
Freelancer_Cooperative_Manuscript_JJang.pdf 