The effects of workers’ participation in governance, ownership and profit sharing on the survival of worker cooperatives - An empirical analysis of 2500 French SCOP

Research question and review of literature: The paper answers the following question: “How does the level of workers’ participation in governance, ownership and profit sharing affect the expected survival of worker cooperatives?”. As such, this research focuses on the nexus between workers’ participation and worker cooperatives (WCs)’ performance. Theory identifies three channels through which workers’ participation affects, either positively or negatively, company's performance: the workers’ productive capacity (Park, Kruse, & Sesil, 2004), the workers’ effort (Bonin, Jones, & Putterman, 1993) and the company’s organizational effectiveness (Hansmann, 2000). From an empirical point of view, in comparison with conventionally owned firms (CFs), previous studies have generally assessed that early survival of WCs meets or exceeds CFs’ and that they demonstrate a median lifespan as long or longer than CFs (Pérotin, 2004 and Burdín, 2014). Various studies also tend to suggest a positive effect of workers’ participation on productivity. However, like CFs, WCs suffer from an elevated probability of not-surviving in their early years (Olsen, 2013) and the positive effect of workers' participation on productivity seems to vary depending on the type of workers’ participation analyzed. Moreover, evidence of a lower economic performance of WCs does exist as well, especially for undercapitalized WCs and in certain industries (Defourny, 1990). Heterogeneity of the studies contexts and methods as well as divergences in results support the necessity of further research on WCs’ performance and expected survival.

Methodological approach: The methodology used consists in the estimation of a survival function for more than 2500 French WCs from 2006 to 2012. By including independent variables measuring the level of workers’ participation in governance, in ownership and in profit sharing, estimations explain the relation between the various types of workers’ participation and the probability to survive of a WC. Only few authors, among which Pérotin (2004), Olsen (2013) and Burdín (2014), have used the estimation of a survival function in the framework of WCs’ performance.

Main argument: In comparison with the method generally used to evaluate the productivity of WCs, i.e. the estimation of a production function “augmented” by variables apprehending the different forms of participation, the estimation of a survival function avoids the problem of endogeneity between performance and level of involvement. Therefore, the research conducted improve the robustness of the observed effects.

Main conclusions and their relevance to an international audience: Through the research, we apprehend better potential advantages and weaknesses of the specificities of the WC system and in particular, the effects of workers’ participation in governance, ownership and profit-sharing on their cooperative’s survival and performance. In an overall search for a greater pluralism of economic models, the progress of the ongoing debate on the effects of workers’ involvement appears to be crucial.

Main references:

Bonin, J. P., Jones, D. C., & Putterman, L. (1993). Theoretical and empirical studies of producer cooperatives: will ever the twain meet? Journal of Economic Literature, 31(3), 1290–1320.

Burdín, G. (2014). Are Worker-Managed Firms More Likely to Fail Than Conventional Enterprises? Evidence from Uruguay. Industrial & Labor Relations Review, 67(1), 202–238.

Defourny, J. (1990). Financial Equilibrium And Risk Aversion In French Workers’ cooperatives. Annals of Public and Cooperative Economics, 61(2‑3), 331–351.

Hansmann, H. (2000). The ownership of enterprise. Harvard University Press.

Olsen, E. K. (2013). The Relative Survival of Worker Cooperatives and Barriers to Their Creation. In D. Kruse (Éd.), Advances in the Economic Analysis of Participatory & Labor-Managed Firms (Vol. 14, p. 83‑107). Emerald Group Publishing Limited.

Park, R., Kruse, D., & Sesil, J. (2004). Does employee ownership enhance firm survival? In Employee participation, firm performance and survival (p. 3–33). Emerald Group Publishing Limited.

Pérotin, V. (2004). Early cooperative survival: the liability of adolescence. In Employee Participation, Firm Performance and Survival (Vol. 8, p. 67‑86). Emerald Group Publishing Limited.