Democratic firms and economic success. The co-op model

Abstract

This paper analyzes how co-operative principles, particularly democratic management, affect the co-op’s economic objective. The theoretical model specifies the characteristics presented by the production function so democracy generates positive net income. Costs derived from maintaining the one person one vote criterion are explicitly incorporated into this function upon new membership. The results show that democracy contributes to the economic success when the decision-making strategy followed by the partners considers all cooperative principles, especially when a retained earnings policy is regularly applied. This study can be extended to all of Social Economy firms concerned about reinforcing democratic institutions through the business sector. This study can be extended to all of Social Economy firms concerned about reinforcing democratic institutions through the business sector.

Keywords

• Co-op principles
• Co-op objectives
• Economic participation
• Democratic management
• Decision costs
• Economic surplus