Co-operative firms are mutual benefit organisations created by self-organised principals to protect the participation rights of their membership with the aim of satisfying its needs. Members are directly invested of the responsibility to define and pursue the objectives of their organisation. Co-operatives do not, as a norm, maximise private returns accruing to the investment of financial capital. They are usually controlled on an equal voting-right basis by different typologies of patrons (e.g. producers, workers, consumers) or by a mix of them (multi-stakeholder co-operatives).
Co-operative pursue objectives other than the ones of investors, private objectives vested in external owners are substituted with mutual-benefit aims. This puts the burden of the fulfilment of economic, financial, and organisational requirements directly on the self-organised principals. However, the co-operative duty to act in the best interest of its members is put under strain when there is no alignment between the aims of co-operation and individual behaviours. To address this issue, this paper relates outcomes with the interplay between specific individual values and motivations on the one hand, and firm governance and objectives on the other, through the mediating role of the incentive structure. We also suggest that effectiveness responds to the ability of self-defined rules to foreclose the risk of opportunism and, in so doing, allow the achievement of the desired outcomes.
Among the different literatures, new institutional, behavioural and evolutionary economics have provided insights on specific aspects of economic choice in mutual benefit organizations, each of these in its own merit but without providing a comprehensive framework.
If one the one hand new-institutionalism explains the ‘dark side’, motivational theory provides the insights to understand the ‘silver lining’ of co-operation. Both realities coexist and influence one another. Thus, over time, repeated opportunistic behaviours can discourage co-operators. Their trust in fellow members and inclusive attitudes would thin, negatively impacting on their motivations. Building on evolutionary and behavioral theory, we take rules and practices as the coordinators of the activities undertaken by self-organised principals. What is required is the formal elaboration of effective governance mechanisms that reinforce fundamental values and individual experience in a relational context. Seeing the ‘silver lining’ requires, besides democratic participation, relations based on trust and reciprocating behaviours, and inclusive and fair governance is precondition for alimenting the intrinsic motivation of individuals.
We address what enables self-organised entrepreneurial ventures to be both efficient and effective. Our suggestion, in line with the institutionalist tradition led by John Commons (1931), is to focus on the interplay between values, rules, behaviours and outcomes. Specifically, institutions empower individuals, being <> (quoted in Mirowski 1987: 1020). In this respect, organizational routines and working rules manifest their dual role of limiting deviant behaviours on the one hand, and promoting individual wellbeing on the other. The implementation of constraining rules serves as a precondition for controlling opportunistic behaviours, while inclusion in the definition of organisational objectives enables representation of the members’ interests. Inclusion, moreover, sustains resilience to a changing environment by supporting the regeneration of intrinsic motivations (Borzaga, Tortia 2006; Sacchetti 2013).
