Research on Cooperative Governance, Behavior, and Performance:

Agricultural cooperatives have been important to farm economies for more than 50 years. About 30% of production costs and market receipts pass through cooperatives, but little theory-driven empirical research on the organization and function of cooperatives exists. We propose studying cooperative behavior that is the result of the dual roles farmer members play in cooperatives---as both input suppliers (or customers) and monitors of management (in their role as directors). Managerial oversight and directorship by members is a direct byproduct of the cooperative business form, and is the central difference between cooperative and investor-owned governance.

Our proposed research is innovative because we model cooperative governance as contractual relationships among farmers, management, and financiers. This approach enables us to cleanly model the core difference between a cooperative and investor-owned firm without considering either firm's “objective function.'' Our proposed research is critically important because we account for empirical observations that suggest a welfare-enhancing role for cooperatives that the extant literature on the theory of cooperative behavior and performance has mostly ignored.

The principal aims of this research project are: (1) to generate hypotheses regarding differential governance practices across cooperative and investor-owned firms; (2) to test for and measure these differences among firms in the food and agricultural sector of the U.S. economy; and (3) to evaluate the effects of these differences on the behavior and performance of cooperative firms. Our study will be the first we know to systematically and empirically study cooperative governance using clear theoretical predictions as guideposts. This research will generate important new insights regarding the means to effective governance in cooperatives.

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