Chain Interdependencies, Measurement Problems, and Efficient Governance Structure: Cooperatives versus Publicly Listed Firms

Li Feng and George Hendrikse

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: We determine the circumstances when the absence of public listing, often believed to be a disadvantage, makes a cooperative the unique efficient governance structure. This is established in a multi-task principal-agent model, capturing that cooperatives are not publicly listed and their CEOs have to bring the downstream enterprise to value as well as to serve upstream member interests. Not having a public listing prevents the CEO from choosing the level of the downstream activities too high. Cooperatives are uniquely efficient when the upstream marginal product multiplied with a function increasing in the strength of the chain complementarities is higher than the downstream marginal product.

Keywords: chains; cooperatives; governance; measurement (search for similar items in EconPapers)
JEL-codes: M M13 O32 (search for similar items in EconPapers)
Date: 2011-01-17
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Citations: View citations in EconPapers (8)

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