Introduction Most large-scale enterprise in the United States is organized in the form of the conventional business corporation, in which the firm is collectively owned by investors of capital. Other ownership patterns are prominent in a number of important industries, however. Many firms, for example, are owned by their customers. These include not just consumer retail cooperatives, which are relatively rare, but also business-owned wholesale and supply cooperatives, which are quite common, as well as public utility cooperatives, mutual insurance companies, mutual banking institutions, and cooperative and condominium housing. Further, many firms are owned by persons who supply the firm with some factor of production other than capital. Worker-owned firms, which predominate in professional services such as law and accounting, are conspicuous examples, as are the agricultural processing and marketing cooperatives that dominate the markets for many farm products. Finally, a number of important service industries are heavily populated by nonprofit firms, which have no owners at all. In this essay I explore the economic factors responsible for these different patterns of ownership. In recent years a number of scholars have explored various aspects of enterprise ownership. In particular, Williamson and Klein, Crawford, and Alchian have dealt insightfully with the influence of transactionspecific investments on the assignment of ownership, and I shall draw heavily here on the concepts they have developed. Similarly, a number of writers have looked at questions of ownership in particular contexts.

https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=6052&context=fss_papers

Ownership of the Firm

A comparison of regional dairy cooperatives with investor-owned dairy firms from the period 1976-87 produced empirical findings that are at variance with the hypotheses suggested by the theory of cooperatives The cooperatives in the sample performed significantly better than the IOFs when compared by leverage, liquidity, asset turnover, and coverage ratios, while the rate of return to equity was not found to be significantly different Techniques are also proposed for valuing the nonmarket aspects of cooperatives that are not captured by financial ratio analysis

Performance of Cooperatives and Investor-Owned Firms in the Dairy Industry

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.

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Cooperative Theory: New Approaches

Sources and uses of funds in agricultural cooperatives are examined and compared to the aggregate of nonfinancial corporations for the period 1973-1987. Cooperatives are observed to finance nearly half their growth with equity. The equity financing proportion of cooperatives is statistically indistinguishable from the national average of nonfinancial corporations in the years 1973-1983 and is consistently higher than the national average since 1984. This finding contradicts the hypothesis of equity shortage in cooperatives.

Financing Of Growth In Agricultural Cooperatives

This study examines the hypothesis that cooperatives suffer from a shortage of equity capital because of ownership structure and nonmarketability of cooperative equity. The empirical findings indicate that agricultural cooperatives finance nearly half their growth with equity. Contrary to theoretical expectations, the equity financing proportion of cooperatives is found to be statistically indistinguishable from the national average of nonfinancial corporations for 1973-1983 and is higher than the national average since 1984. Cooperatives are observed to raise new debt mainly through short-term borrowing. This indicates that banks may be reluctant to lend long-term to cooperatives because of their "unorthodox" ownership structure.

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Financing of Growth in Agricultural Cooperatives

Cooperatives are under increasing pressure to redeem the equities of former and overinvested patrons. This report discusses the issues concerning equity redemption and describes alternative equity redemption plans and methods that can be used to improve or facilitate redemption. Trade-offs between cash patronage refunds, redemption, and growth are examined, and methods for distributing cash benefits to patrons are compared. Legal and tax aspects and board responsibilities are reviewed, and the influences of federated cooperatives and lending institutions are considered. The impact of proposed mandatory redemption programs is evaluated, and procedures for adopting a voluntary redemption program are detailed.

Kenneth P. Krueger

Papers

Equity Redemption: Issues and Alternatives for Farmer Cooperatives